Number of Failed & Permanent HAMP Mods Nearly Equalby Tim Manni
Number of permanent loan modifications: 299,000.
Number of trial modifications canceled: 278,000.
Number of “active trials”: 637,353.
Number of trial modifications started over the last seven months: 660,000.
“That suggests that the HAMP trial period is about 7 months!” writes Calculated Risk (CR), a financial blog. CR’s observation does seem to coincide with the feedback we’ve received from some readers of this blog: the trial portion of the loan mod process is taking far longer than the three-month period it’s designed to last; and more often than not, borrowers aren’t surviving this trial stage.
CR’s conclusion of the current state of HAMP is perhaps the harshest we’ve heard so far: “The program is dying.”
Is it harsh? Maybe. But realistic? Seems that way…
According to the numbers in April’s HAMP report, the number of “trials started” is decreasing steadily, along with the number of “permanent modifications started.”
Why is this happening?
Changes made to HAMP back in January mandated that lenders and servicers begin demanding the necessary documentation upfront, instead of beginning a trial mod, then accumulate a borrower’s paperwork as the process went along. A consequence of this change (that we noted back in January) was that more borrowers may not qualify for HAMP:
“This should improve the success rate for trial-to-permanent modifications, but will also simultaneously weed out ineligible borrowers at the start of the the process,” said HSH VP Keith Gumbinger. “However, it may ultimately increase deed-in-lieus, short sales, and foreclosures since ineligible borrowers won’t even get trial mods.”
True to Keith’s forecast, the number of delinquent borrowers reached a record high in the first quarter of 2010, yet at the same time, the number of foreclosures has slowed. How can this be?
The pace in which borrowers are entering foreclosures has slowed because HAMP and HAFA (a program designed to create alternatives to foreclosures via short sales and deed-in-lieus) have created alternative paths for resolution. The ending is still the same, it’s just happening at a slower pace or in a different manner.
Readers: Tell us what you think, is HAMP dying?