Servicers Make 116,000 HAMP Trials Permanent
Servicers participating in the Home Affordable Modification Program (HAMP) converted 116,297 permanent modifications through January, up from 66,000 in December, according to the US Treasury Department.
The Treasury launched HAMP in March 2009 to provide capped incentives to servicers for the modification of loans on the verge of foreclosure. According to the latest Troubled Asset Relief Program (TARP) transaction report, the total cap for the 112 servicers under HAMP stands at $36.8bn.
More than 76,000 active modifications need only a borrower signature to become permanent, totaling 190,000 permanent modifications approved by servicers. More than 1m three-month trial modifications commenced through January, and servicers offered 260,000 more.
CitiMortgage and GMAC led all servicers by completing active trial modifications on 50% of their HAMP-eligible mortgages. For CitiMorgage it’s an increase from 47% in December. GMAC increased its percentage from 44%.
CitiMortgage has 246,038 HAMP-eligible loans in its portfolio. It provided 10,929 permanent modifications through January, the fifth most of any servicer in the program.
GMAC has 65,751 in its HAMP-eligible portfolio. It provided 11,494 permanent modifications, the fourth highest of any servicer. It’s an increase from 9,872 in December.
Saxon Mortgage Services, a subsidiary of Morgan Stanley ($25.07 0%), which conducted active modifications on 48% of the 71,429 HAMP-eligible loans in its portfolio, up from 46% in December. Saxon completed 5,312 permanent modifications, up from 2,497 in December.
Wells Fargo ($40.20 0%) completed 17,652 permanent modfications, the most of any servicer in the program more than doubling the 8,424 modifications in December. Wells had active modifications on 38% of the 357,483 HAMP-eligible loans, up from 34 in December.
JPMorgan Chase ($52.29 -0.01%) had the third most permanent modifications at 11,581 through January, up from 7,139 in December. It had active modifications on 38% of the 432,416 in its HAMP-eligible portfolio, up from 36% in December.
Bank of America ($13.51 0%) provided 12,761 permanent modifications through January, up from 3,183 in December. In November, BofA had 98 permanent modifications. BofA completed active modifications on 22% of the more than 1m in its HAMP-eligible portfolio, up from 19% in December. BofA signed the first agreement to participate in the second-lien mortgage modification initiative under HAMP.
To qualify for HAMP, a mortgage must have a current unpaid principal balance of less than $729,750 be occupied by the owner and originated prior to Jan. 1, 2009. Qualifying borrowers must be employed. More than 57% of the borrowers who received permanent modifications claimed a loss of income as the predominant reason for hardship. More than 10% claimed excessive obligation, and 2% claimed illness of the principal borrower.
At the outset of the program, servicers collected the documents during the three-month trial plan, creating a lag time in the permanent conversion rate. The Treasury and the Department of Housing and Urban Development (HUD) changed guidelines on how servicers introduce borrowers into the program. The changes go into effect June 1, 2010.
The Treasury admits that the program is not for every borrower. Seth Wheeler, senior adviser to the Treasury when speaking at the American Securitization Forum (ASF) in Washington, DC, said the Treasury is shifting its focus away from modifications as HAMP is not always the best solution. A new program, the Home Affordable Foreclosures Alternatives (HAFA), will provide incentives to servicers to provide short sales and deeds-in-lieu of foreclosure. HAFA launches in April 2010.
Critics of HAMP claim that the program isn’t having the effect the Obama Administration first promised when it set a target of 3-to-4m modifications. According to a report from the credit rating agency Moody’s, home prices could decline another 8% from Q409 to the end of 2010. The “underwhelming” success of HAMP would be a key driver in the decline as analysts predict 70% of cured mortgages – delinquent loans brought into current status – would re-default.
A House Committee on Oversight and Government Reform began an investigation of HAMP on concerns of the “effectiveness and efficiency" of the program.
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