HAMP Trial Cancelations Catching up to Permanent Modifications
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).
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