The Making Home Affordable Program (HAMP) initiated 1.3m trials as of July 2010, but is having difficulty retaining program participants through the process of making their modifications permanent. According to the July Servicer Performance Report released by the US Department of Housing and Urban Development (HUD), 616,839 modifications have been canceled while 434,716 modifications have been made permanent throughout the program's lifetime.

The eight largest HAMP servicers alone hold 409,981 canceled modifications. 45.5% of those borrowers are in the process of receiving an alternative modification, 9.8% are starting foreclosure, 2.3% are pursuing loan payoff, 2.7% are going through bankruptcy, 5.9% are current on their payments, 1.8% completed foreclosure and 30.1% have action pending.

Quinn Eddins, director of research at Radar Logic, said the amount of borrowers canceling their HAMP trial mortgage modifications signifies that the current solutions under the program simply aren't working.

"HAMP entails extending the period over which mortgages can be paid, which is all fine and good, but if the homeowner continues to be deeply under watt, there's always going to be the incentive to stop paying the mortgage or redefault," Eddins told HousingWire in an interview. "A new way of modifying mortgages should be explored."

The HUD report noted the most common causes of trial cancellations are insufficient documentation, trail plan payment default and borrower eligibility (many drop their debt-to-income ratio below 31% before completion of the trial).

Write to Christine Ricciardi.

The Congressional Budget Office (CBO) projected Friday the total cost of Troubled Asset Relief Program (TARP) over its lifetime would be $66bn. This is down from the $109bn lifetime cost projected in March. Outlays for Fannie Mae and Freddie Mac will fall from $96bn in 2009 to $41bn this year, the CBO estimates, mostly because the two entities are expected to recognize fewer losses on their mortgage investments and guarantees.

The CBO said three things account for the predicted cost reduction: further repurchases of preferred stock and sales of warrants from banks, a lower estimated cost for assistance to the automobile industry, and the elimination of the opportunity to create new programs. Under the Dodd-Frank Act, signed by President Obama on July 21, TARP's funding was cut to $475bn from $700bn. The legislation does not permit TARP to create or fund any new programs.

"Taken together, outlays for the Troubled Asset Relief Program, Fannie Mae, Freddie Mac, and federal deposit insurance will be $361bn lower in 2010 than they were last year," according to page 9 of the CBO budget and economic outlook, available by clicking here.

The Pay It Back Act of the Dodd-Frank Act effectively ended the TARP program by reducing available funds to $475bn, from $700bn, and mandating that unused funds cannot be used for any new programs, according to an email from Keefe, Bruyette & Woods (KBW), an international financial services firm.

KBW released its latest edition of the Troubled Asset Relief Program (TARP) Tracker reporting that the TARP Capital Purchase Program (CPP) posted losses of $2.3bn. The official numbers, released Friday, show expectations of losses for the entire TARP program are lower.

The loss, according to KBW, came from CPP investments in Commercial Investment Trust (CIT), which were replaced by contingent value rights (CVRs) which expired without value in Feb., and Pacific Coast National Bancorp, which dismissed its bankruptcy proceedings with no recovery to the US Treasury. CIT declared bankruptcy in November 2009.

The original investments made by the Treasury were $2.3bn and $2.1m, respectively.

The Treasury initially invested $204.9bn in 707 banking institutions under CPP and, to date, received repayments totaling $147.5bn. There are currently $55.1bn remaining in outstanding CPP capital investment in 617 banks.

Of those 707 banks, 98 failed to make the most recent TARP dividends payments — due in May — and 64 repaid the Treasury in full. Full repayments totaled $13bn. The Treasury's average return on investment (ROI) for the banks that fully repaid their investment was 10.3%, with six investments yielding more than 20%. First ULB Corp. yielded the highest ROI at 29% while SBIB yielded the lowest ROI at 2.9%.

KBW said that the banks that fully repaid CPP outperformed the Standard & Poor's 500 Financial Index since the disposal of warrants with an average gain of 2.3%. However, three TARP recipients, UCBH Holdings, Pacific Coast National Bancorp and Midwest Bank Holdings, are now failed institutions.

Write to Christine Ricciardi.

Additional reporting by Jacob Gaffney.

A look at stories across HousingWire’s weekend desk…with more coverage to come on bigger issues:

The Office of the Comptroller of the Currency (OCC) released Friday a list of  Community Reinvestment Act (CRA) performance evaluations for 39 national banks and insured federal branches of foreign banks. Of the banks, nine received an outstanding rating, 30 received a satisfactory rating and none needed to improve. None were of substantial noncompliance.

Evaluations are available from the OCC's official website.

Fannie Mae issued a reminder to sellers and servicers Friday to direct mortgage insurers to provide Fannie Mae with information concerning its insured loans. One week ago, the government-sponsored enterprise (GSE) released a Selling Guide Announcement as a clarification addendum to the Undisclosed Liability Policy, part of the Loan Quality Initiative.

According to the announcement, lenders are not required to obtain a second credit report just before a loan closing. The reminder states that a Mortgage Insurance Disclosure form must be filled out by the insurer and sent to Fannie Mae on or before Oct. 1, 2010. That form as well as Mortgage Insurance Disclose Instructions for filling out the form are available at eFannieMae.com.

Stocks were off to a solid start last week, but ended with less than impressive results, according to a report released Friday by Econoday Simply Economics analyst R. Mark Rogers.

He said the week started out in favorable market conditions — Dell announced its endeavor to buy data-storage company 3PAR and Intel made public its plan to purchase Texas Instrument’s line of cable modem products — but the market boost was hindered by economic downfalls including the jump in first-time jobless claims and housing starts missing expectations.

"Thursday was a big down day for equities as traders either took the news as slow growth ahead or maybe, just maybe, a double dip," Rogers said in the report. "And though there was no economic news at week end, negative sentiment carried over to the last day of trading."

The report commented on the current state of US housing:

Recent swings in starts have been due to volatility in the multifamily component. The July improvement was led by a 32.6% bounce back in multifamily starts, following a 33.3% drop in June.  The single-family component—weighed down by inventories—declined 4.2% after dipping 1.7% in June.

The Federal Deposit Insurance Corp. (FDIC) announced the failure of eight banks on Friday, bringing the total numbers of failed banks in the first seven months of 2010 to 118.

Four of the closings happened in California. The California Department of Financial Institutions closed The Sonoma Valley Bank in Sonoma, CA. The FDIC was named receiver and entered into a purchase agreement with San Rafael-based bank Westamerica Bank. The three branches of Sonoma Valley Bank reopened Saturday as Westamerica Bank.

Los Padres Bank of Solvang, CA was closed by the Office of Thrift Supervision. The bank had liabilities exceeding assets by $100m at its time of closing. The FDIC and its purchase agreement partner, Pacific Western Bank, entered into a loss-share transaction on $579.m of Los Padres' $770.7m assets.

The California Department of Financial Institutions also closed two banks in northern California Friday, Butte Community Bank in Chico and Pacific State Bank in Stockton. Collectively the banks operated 23 branches which will reopen as Rabobank, National Association.

Rabobank, National Association will pay a premium of 4.05% to the FDIC to assume all of the deposits of Butte Community Bank, but did not pay the premium for Pacific State Bank.

Chicago-based ShoreBank was closed by the Illinois Department of Financial and Professional Regulation. The bank had approximately $2.16bn in total assets and $1.54bn in total deposits at its time of closing.

The Office of Thrift Supervision closed the Imperial Savings and Loan Association in Martinsville, VA, which had only one branch. It will reopen today as River Community Bank, National Association.

Two banks closed in Florida last week. Community National Bank at Bartow of Bartow, FL was closed by the Office of the Comptroller of the Currency and had $67.9m in total assets and $63.7m in total deposits at its time of closing. Independent National Bank of Ocala, FL was also closed by the Comptroller with $156.2m in total assets and $141.9m in total deposits at its time of closing.

Branches for both banks will reopen as branches of CenterState Bank of Florida, National Association.

Write to Christine Ricciardi.

Letters from members of Congress released Friday urged President Obama and the Federal Housing Finance Administration (FHFA) to use aggressive administrative power to recover money from companies that used fraudulent and deceptive practices to shift losses on to Fannie Mae and Freddie Mac.

Congressman Barney Frank (D-MA), Chairman of the House of Financial Services, and Congressman Paul Kanjorski (D-PA), Chairman of the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, authored the letters concerning the costs to American taxpayers to support the loss suffered by the government-sponsored enterprises (GSEs) due to fraudulent transactions.

Frank cited that GSE loss already cost taxpayers almost $150bn to date and the bill looks set to rise.

"These losses largely result from business decisions during the bubble years that were honest but flawed," Frank wrote. "However, some of these losses result from deception. Private companies sold Fannie and Freddie loans or securities based on fraudulent documents… they should be fought with every tool at the companies' and the agency's disposal."

The FHFA has pursued two kind of legal claims to limit taxpayer loss in recent times. First, the FHFA demanded that lenders purchase mortgage buyback from the GSEs for mortgages that did not meet contractual representations and warranties. Kanjorski said in his letter, co-authored by Congressman Brad Miller (D-NC) and Congresswoman Jackie Speier (D-CA), that as of March 2010, Freddie Mac alone demanded lenders repurchase $4.8bn in mortgages.

Fitch Ratings reported earlier this week the volume of GSE buybacks could increase to $180bn.

Second, the FHFA issued 64 subpoenas in July to obtain information needed to determine if GSE losses are "the legal responsibility of others." Documents subpoenaed include loan files, underwriting documents and property appraisals the FHFA tried to obtain voluntarily, according to Kanjorski.

"It is critically important to protect taxpayer funds. It is equally important that the American people know that their government is acting on their behalf, no on behalf of powerful financial institutions," Kanjorski wrote in his letter dated Aug. 13. "The failure to  pursue legal claims to limit losses to taxpayers would be another indirect subsidy for an industry that has received too many such subsidies already."

Write to Christine Ricciardi.