Consumer Law

HAMP homeowners stuck in limbo

By Alan White

By Alan White

More than 700,000 homeowners are in three-month "temporary" trial loan modification plans, but mortgage servicers have managed to convert only 31,382 to permanent  modifications, according to the Treasury Department's November report released today.   

Given that the industry voluntarily modified, permanently, more than 100,000 mortgages per month just before HAMP was announced, these results are abysmal.  Testimony before a Congressional hearing Tuesday on HAMP confirmed that 70% or more of homeowners on temporary modification plans are making payments, so the problem is largely in getting the paperwork for permanent HAMP modifications done.  

Once again the report also highlights huge disparities in performance among different mortgage servicers.  The chart at right compares cumulative temporary modifications reported in the August report with permanent modifications reported through November.  The four big banks, BankofAmerica, Chase, Citi and Wells Fargo, converted fewer than 1%, fewer than 1%, 4% and 11% of their temporary mods, respectively.  Ocwen, meanwhile, has converted 89% of borrowers who were on temporary modifications in August to permanent mods by November.  Although scale is clearly a problem, Aurora, servicer of a large portfolio, managed to convert 23% of its modified loans to permanent modifications. 

Homeowners on trial modifications continue to be reported as delinquent to their credit bureaus, continue to accumulate unpaid interest, and face continuing threats of foreclosure.  Given the very large subsidies HAMP will pay the mortgage servicers if they can do this right, and the fact that the four biggest servicers were bailed out by the taxpayers in numerous other ways, we ought reasonably to expect better performance than this.   

Although Treasury officials had promised to report some information on performance of modified loans, none was included in the December report.  The fiasco in the making that this report reveals, and the fact that HAMP still does not deal effectively with the huge negative equity problem, compel the conclusion that we need a new plan to tackle the foreclosure crisis.

Full post as published by CL&P Blog on December 10, 2009 (boomark / email).