Consumer Law

The Failure of HAMP - Update

By Alan White

By Alan White

Treasury released the April report on the HAMP mortgage modification program today.  The tally for April is 68,000 permanent modifications, still well short of what the industry was doing without HAMP subsidies a year ago.  According to HOPE NOW's latest report, during the first three months of 2010 two-thirds of mortgage modifications were done by servicers outside the HAMP program, without the HAMP subsidy.  We already know from the OCC/OTS mortgage metrics reports that non-HAMP mods are more likely to reduce principal than HAMP mods.  In short, twice as many workouts are happening without taxpayer subsidy, and for some reason servicers can find something better to offer homeowners in two out of three cases.  If the HOPE NOW numbers are correct, there are actually more modifications being down now than foreclosure starts, so perhaps in the months to come we will actually see the foreclosure inventory come down.

Also worth noting is that almost as many temporary modification plans resulted in cancellation as in conversion to permanent modifications.  My public radio station WBEZ had a story this morning about a homeowner who was in a temporary mod from last July until April, when he got word that he would not qualify for a permanent modification, and by the way now owes thousands more despite making all his payments.  If the nonconversion rate continues at 50% or more, HAMP can ultimately reach fewer than 800,000 homeowners, and obviously not all of them will save their homes.  A far cry from the Administration's initial promises to help 3 million or more.

On the foreclosure front, there should be first quarter numbers out from OCC/OTS and the Mortgage Bankers delinquency survey this week or next.  The news will probably be mixed - the number of foreclosure starts has been declining for the last two quarters, but the number of foreclosure sales is on the rise, and the total inventory of mortgages in default or foreclosure stubbornly refused to come down from peak crisis levels. 

Full post as published by CL&P Blog on May 17, 2010 (boomark / email).