The Obama Administration has released April data for the Home
Affordable Mortgage Program (HAMP).
The number of homeowners who completed HAMP's mandatory 90 day trial period and were converted
into permanent load modification status rose 68,000 to 299,092 in April. This is a 13 percent increase over the number of permanent
modifications reported up until the end of March.
All borrowers converted to permanent modifications
received a reduction in their loan's interest rate; 53.4 also received an
extension of the loan's term and 28.6 were given principal forbearance.
According to the report, lower monthly mortgage payments for borrowers
in active trial and permanent modifications represent a cumulative
payment reduction of more than $3.1 billion to date. The median savings
for borrowers in permanent modifications is $516.09, or 36% of the
median before-modification payment.

FHA Commissioner and HUD Assistant Secretary for Housing
David Stevens said, "As the number of homeowners receiving permanent
modifications continues to increase, the Administration's comprehensive
efforts
are making an impact in the housing market's overall recovery. Today
mortgage rates remain at historic lows,
around five percent; foreclosure starts are down 27 percent from last
year this
time; and home prices and the pace of home sales have stabilized in
recent
months."
47,160 new borrowers had began trial loan modifications at the end of April. Of the 1,487,594 offers that were been extended, 1,214,085 borrowers have enrolled in the program.

In terms of the overall conversion rate, 20.1 percent of all offers
extended have been converted to permanent loan modifications,
much
improved from last month's rate of 16.1 percent.
When measuring
performance against the number of HAMP trial offers that have actually
been accepted, 24.6 percent of homeowners who have completed the 3-month
period have been converted to a permanent modification. Again, much improved
from the 19.8 percent conversion rate reported in March.
The primary criticism of HAMP almost from the beginning has
been the low rate of loan modifications that were converted to permanent
status
after the mandatory 90 day trial program.
While over 900,000 homeowners had entered the HAMP program by the end of
2009, fewer than 70,000 had been converted to permanent status. It was
to be expected that conversions would trickle
in initially, but many loans seemed stuck in trial status.
Since the
first of the year, program
administrators have attempted to isolate the problems that were leading
to delays
and/or failures in conversion and have employed a number of measures to
improve
performance.
"The number of homeowners receiving significant relief through a mortgage modification continues to rise," said Chief of Treasury's Homeownership Preservation Office (HPO) Phyllis Caldwell. "Our focus now is on improving the homeowner experience and holding servicers accountable for their performance. Increased transparency through more robust reporting of servicer-specific data will contribute handily to those efforts."
The April report unveils a new metric which gives servicer-specific
information on rates of borrower conversion from trial to permanent
status. The Treasury Department said that the data
shows that there is wide variation among servicers in these areas,
further
demonstrating the need for transparency regarding servicer
performance." In fact, the data should make a couple of
servicers very uncomfortable.
Two servicers - Saxon and JPMorgan Chase - had stunningly
high numbers that had been in trial for six months or more, 76 percent
and 78
percent respectively. These two were
also among the servicers with the lowest conversion rates at 28 and 21
percent.
Saxon is among the smaller companies
however JPMorgan services the second largest pool of HAMP eligible
loans.

The Department also
told servicers of new reporting requirements that will go into effect in
June. The new reporting will include information on
compliance with program guidelines, program execution, and homeowner
experience
including servicer handling of calls from homeowners, the time it takes
to
resolve programs reported by third parties such a housing counselors and
attorneys, and the servicer's share of homeowner complaints to the
Homeowner's
HOPE Hotline. READ MORE
The importance of one change that will go into effect on
June 1 is demonstrated by the servicer-specific data on conversion rates
and
the numbers of aging trials. Initially,
servicers made the decision whether to begin the trial modification
period
before or after all required document were received and verified. Many
servicers used stated income in order to
get trials started and then collected income verification during the
course of the
trial. The new data makes it clear that
this is not working, and effective June 1 servicers must have borrower
documents in-hand before offering borrowers a trial modification.
Without exception, those servicers with a conversion rate over
50 percent have begun trials only after borrowers had supplied the
required
documents. Without exception those that were relying on stated income
and
verification to company had conversion rates under 50 percent.

MND has discussed recent Administration initiatives to motivate servicers to play a
bigger role in helping families save their homes, but we wonder if servicers are totally to blame or if the Administration is starting to scramble as the HAMP program may be close to helping all who are capable of being helped.
Borrowers continue to report that the overwhelming reason
for their financial difficulties is loss of income. 60.4 percent say
that was their primary
reason for needing a modification. 10.2
percent cited excessive obligations and 10.2 percent said it was the
illness of
the primary borrower. 77.1 percent of
borrowers were in default when they entered the program while 23.9
percent were
at risk of default.
Combine those stats with the fact
that 6.7
million Americans have been unemployed for longer than 27 weeks and
it's easy to see why HAMP is failing to convert more borrowers into
permanent loan modifications.
HAMP estimates that there are 3,275,249
delinquent loans and 1,702,134 borrowers that are eligible for a HAMP
modification. With 1,487,597 trial offers already extended to the 1,702,134 pool of eligible borrowers and the number of Americans without a job for longer than 27 weeks continuing to rise, it appears HAMP may be running out of qualified borrowers.
The true test of HAMP's
success will be whether or not permanent loan modifications are able to
avoid re-default.
THIS SIGTARP REPORT calls attention to several factors limiting the effectiveness of HAMP.
HERE are some outspoken opinions on the subject.