Metrics
for the Making Home Affordable Program (HAMP) improved substantially during
March according to data released late Wednesday by the Treasury
Department. The foreclosure prevention program,
a joint effort by Treasury and the Department of Housing and Urban Development,
has been widely criticized for its effectiveness in moving distressed borrowers
into permanent loan modifications.
During
the March, however, over 60,000 homeowners enrolled in the three month trial
period required by the program were converted into permanent modifications. This brings the cumulative total of permanent loan modifcations to 230,801. The March
conversions represent a 15 percent increase over the 53,000 accomplished in
February and a 3.5-fold rise in permanent modifications since
the first of the year. An additional 108,000 permanent modifications are
pending; most are awaiting approval from the borrower.

In terms of the overall conversion rate, 16.1 percent of all offers extended have been converted to permanent loan modifications. Much improved from last month's rate of 12.6 percent. When measuring performance against the number of HAMP trial offers that have actually been accepted, 19.8 percent of homeowners who have completed the 3-month period have been converted to a permanent modification. Again, much better than the 15.6 percent conversion rate reported in February.

The
number of homeowners entering the program, however, is declining as might
reasonably be expected after the initial flood of applicants. There were 57,000 new entrants into the
program in March compared to 72,000 in February. A total of 1.44 offers for modifications have
been extended to borrowers and 1.17 million homeowners have started the trial
modification program.
There was
a large number of trial modifications cancelled during the month. Since the program started in the spring of
2009, there have been a total of 155,000 cancellations, 66,500 of which were
recorded in March. The report provided
no explanation for this number. A total
of 2,879 permanent modifications have been cancelled compared to 1,400 reported
last month.
Under
HAMP, borrowers are offered a five year modification of their existing mortgage
based on a debt to income ratio that cannot exceed 31 percent. The servicers who administer the program can
offer an extension of the loan term, a reduced interest rate, and/or a
reduction of the principal balance. 100 percent of the modifications to date have
included an interest rate reduction, 39 percent have involved an extension of
the term of the loan and 28 percent have had some type of principal reduction
or forbearance. Servicers have been reluctant to offer forbearance to borrowers and HAMP has recently announced
a new component of the program to encourage this method of modification.

The HAMP
report estimates that approximately 6 million residential mortgages are
currently 60 days or more in arrears and that approximately 1.7 million of
these are eligible for the HAMP program. Servicers are encouraged to contact borrowers
to request information regardless of their apparent eligibility. To date servicers have sent out over four
million solicitation letters.
CitiMortgage
and GMAC continue to be the most active participants in the program;
both have
nearly 50 percent of their estimated eligible borrowers enrolled in
trial or
permanent modifications.

The
reasons for delinquency as reported by the borrowers have remained relatively
consistent over the life of the program; 59.1 percent report that their
hardship was caused by a loss of income (a slight increase from 57.4 percent in
February), 10.5 say it is excessive obligations and 2.8 percent report their
delinquency was principally caused by the illness of the principal borrower. Combined with the fact that 44.1
percent of the 6.5 million unemployed Americans have been out of work
for longer than six months, this statistic implies the true
test of HAMP's success will be
whether or not permanent loan modifications are able to avoid
re-default.
