The Home Affordable Modification Program will prevent up to 800,000 foreclosures before it expires at the end of 2012, “far fewer” than the 3 million to 4 million expected when the program first launched in March 2009, according a report from the Congressional Oversight Panel. The Treasury Department launched HAMP to provide an incentive to mortgage servicers to modify loans on the verge of foreclosure. As of the end of October, servicers have completed roughly 519,000 permanent modifications. Tim Massad, acting assistant secretary for financial stability at the Treasury said it is important to recognize how many have received help under the program, and that HAMP’s true legacy will be the standard it set for modifications going forward. “That’s a lot of people,” Massad said in a conference call with reporters. “We’ve set a new standard for the industry. There were very few successful proprietary mods before HAMP started.” Conversions, from a trial modification to a permanent modification, have dropped every month since June when the Treasury reported nearly 50,000 permanent modifications in that month alone to just more than 23,000 in October. More than 35,000 HAMP-modified loans have already redefaulted for a rate of 6.9%. But within one year after modification, the 90-plus day delinquency rate jumps to 21%. The Treasury expects a 40% redefault rate over a five-year span. The Treasury states that it will spend $30 billion in Troubled Asset Relief Program dollars for HAMP, but according to COP, that number might be closer to $4 billion. But Sen. Ted Kaufman (D-Del.), chairman of COP, stopped short of calling the program a failure, but did say its impact has underwhelmed many. “Treasury did not foresee such high unemployment numbers,” Kaufman said a separate conference call with reporters. “I think the program is turning out to have a lot less impact on the market than we thought it would have.” The Treasury has made adjustments to the program in order to boost conversion rates and get more borrowers into longer-term modifications. Earlier in the year, the Treasury required borrowers to submit all financial documents before entering a trial stage, and it required participating servicers to accept only verified income during the process, not just stated income. This has posed the biggest problem to the nation’s largest servicers. According to the COP report, conversations with Treasury officials indicate that larger servicers such as Bank of America (BAC), Wells Fargo (WFC), JPMorgan Chase (JPM) and CitiMortgage (C), which all hold conversion rates of roughly 35%, used primarily stated income to get the borrower into a trial during the early days of HAMP. “As a result, these servicers still have large pools of difficult to convert, stated-income modifications,” according to the COP report. Kaufman was highly skeptical that Congress would take action in order to boost HAMP’s performance. “We have the tools for regulators to operate,” Kaufman said. “I’m not sure anything with the TARP name on it right now would be met with open arms in Congress. In this case, I don’t think we need it.” Massad, meanwhile, said the servicers are still adjusting operations to fit a landscape drastically changed by the foreclosure crisis. “There’s still a lot of improvement to be made,” Massad said. “It’s been clear all along that the servicers were not equipped to handle this problem. They did not have the systems or the people. The process of modifying mortgages is incredibly people-intensive and resource-intensive. They’ve improved, but there’s still a lot to do.” Write to Jon Prior.
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