Bank of America Permanent HAMP Modifications Increase 5.9% in July
Bank of America (BAC) pushed its total number of permanent mortgage workouts under the Home Affordable Modification Program (HAMP) to 76,300 in July, a 5.9% increase from June. The Treasury Department launched HAMP in March 2009 to provide incentives to servicers for the modification of loans on the verge of foreclosure. BofA converted 4,300 trial modifications into permanent ones in July, about half of the amount done in June. In order for a borrower to receive a permanent modification, he or she must make three monthly payments in the trial stage of the program and submit all documentation. But BofA has completed nearly 100,000 permanent modifications through its own programs outside of HAMP this year. Some of these loans were given second looks after falling out or not qualifying for the government's program. Early problems with collecting necessary documentation for those in the trial stages of HAMP led to thousands of loans spending more than three months there. After the Treasury required a borrower to submit all documentation before entering the trial, servicers began working through this overflow. BofA has trimmed its active trial modifications from 221,395 loans in January to under 85,000 in July, according to the Treasury. According to the bank, the slower pace of new trial modifications follows a transition from accepting verbal financial information to requiring full documentation and underwriting before putting a borrower into a trial. "When a customer is found to be ineligible for HAMP or falls out of a trial modification, we consider an alternative home retention program, and if no viable solution is available, a dignified exit from homeownership," said Rebecca Mairone, default servicing executive for Bank of America Home Loans. While HAMP guidelines outline specific debt-to-income ratios, owner-occupancy and trial payment performance, Mairone reiterated that BofA continues to find other ways to avoid foreclosure either through other modification programs or the government's Home Affordable Foreclosure Alternatives (HAFA) program, which urges servicers to do short sales and deeds-in-lieu of foreclosure. Last week, BofA announced it was testing its own co-op short sale program for borrowers who do not qualify for either HAMP or HAFA. Write to Jon Prior.