Wednesday, January 11, 2012

HAMP Mods Pass 900,000 as Servicers Tackle Seconds, Negative Equity

The Treasury Department released a new report Monday highlighting the results of its flagship Home Affordable Modification Program (HAMP). Nearly 910,000 homeowners have received a permanent HAMP modification to date, saving an estimated $9.9 billion in monthly mortgage payments.

Treasury says borrowers now entering HAMP have a better chance of earning a permanent modification and realizing long-term success. Eighty-three percent of eligible homeowners that signed on to HAMP since June 2010 have received a permanent modification, with an average trial period of 3.5 months.

Treasury’s report stressed that the latest mortgage performance report from the Office of the Comptroller of the Currency found that HAMP has proven more sustainable for homeowners than industry modifications. Because of HAMP’s emphasis on affordability relative to a homeowner’s income and successful completion of a trial payment period, the OCC says 70.5 percent of HAMP-modified loans remain current, versus 57.6 percent of other proprietary modifications.

In releasing the latest numbers, Raphael Bostic, HUD assistant secretary, said when you compare today’s data to market data from 2009, “…it’s clear that we’ve made important progress in recovering from this housing crisis.”

Treasury’s report indicates there are 891,542 more borrowers who are currently delinquent and eligible for HAMP assistance.

Bostic says with so many homeowners still struggling to pay their mortgages, “[t]here is still a lot of work to do.”
He says the administration will continue to press servicers to make use of other government housing programs to assist underwater borrowers, as well as the unemployed.

HAMP’s Principal Reduction Alternative (PRA) requires servicers of non-GSE loans to evaluate program applicants for a principal reduction when the loan-to-value (LTV) ratio is 115 percent or greater. Servicers, however, are not required to reduce principal as part of the modification.

Through November 2011, 38,243 permanent PRA modifications had been granted, with another 15,875 PRA trials in active status. Among active permanent PRA mods, servicers have reduced borrowers’ principal by a median 31.3 percent, or $66,308.

Bank of America leads the way, with 10,940 permanent PRA mods started.

Treasury’s Making Home Affordable Unemployment Program (UP) provides a temporary forbearance to homeowners who’ve lost their jobs. Under Treasury guidelines, unemployed homeowners must be considered for a minimum of 12 months’ forbearance. So far, servicers have initiated 16,633 UP forbearance plans.

The government’s Second Lien Modification Program (2MP) was also prominently featured in this month’s report. Treasury says 47 percent of eligible second liens have received a 2MP modification, with many of the remaining second liens still in the evaluation process, awaiting homeowner response to the 2MP offer, or awaiting conversion of the first lien HAMP trial to permanent status.

Servicer participation in 2MP is voluntary. Six of the 10 largest servicers currently take part in the second-lien program. Treasury’s report shows 54,828 2MP mods have been started, with nearly 10,000 of those resulting in full extinguishment of the second lien.

The median amount of fully extinguished liens is $60,688. Homeowners in 2MP save a median of $163 per month on their second mortgage, in addition to the savings realized from the modification of their first mortgage under HAMP.

Over one-third of 2MP borrowers reside in California (35 percent), followed by Florida (9 percent) and New York (6 percent).

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