HAMP Servicers and Their Metrics Continue to Improve

The Departments of Treasury and Housing and Urban Development released the August version of its monthly Housing Scorecard this afternoon. The Scorecard is a summary of housing data from various sources such as the S&P/Case-Shiller house price indices, the National Association of Realtors® existing home sales report, Census data, and RealtyTrac foreclosure information.  Most of the information has already been covered by MND. 

The Scorecard includes by reference the monthly report on the Home Affordable Modification Program (HAMP).  The current report covers information through July and includes the program's second quarter Servicer Assessment Results.

Since the June HAMP report the program has initiated 14,117 trial modifications and converted 16,767 trials to permanent status.  Over the life of the program which began in early 2009, 1.90 million trials have been started and 1.06 million of them have been converted to permanent status.

Some of the metrics in the report indicate how much the HAMP program has changed over its lifetime.  In the early months of the program trial modifications dragged on for months as documentation was mishandled and other problems jammed the system.  After the administration made substantial changes to the program in June, 2010, many of the problems began to clear.  For example, the month before the changes were put in place there were 190,412 loans that had been in a trial modification for more than six months; today there are 10,286.  Only about 4 percent of the loans that entered trials after the changes are still pending conversion.

Servicers are not performing as well on a mandate to convert loans to permanent status that were 120 or fewer days delinquent when the trial started, a benchmark at which a maximum incentive is paid to the servicer.  Only three servicers are meeting this goal

There are several subsidiary foreclosure prevention programs now operating under the aegis of HAMP.  The Second Lien Modification Program (2MP) has started just over 90,000 second lien modifications.  So far these have resulted in the extinguishment of 20,664 second liens and partial extinguishment of 4,686 liens.  Nearly 65,000 borrowers remain in the program awaiting action on their liens.  The average fully extinguished loan had a value of $62,106 and the average amount of the partial extinguishments is $8,918.

Home Affordable Foreclosure Alternatives (HAFA) provides borrowers an opportunity to avoid foreclosure through a short sale of property or by giving the lender a deed-in-lieu of foreclosure.  To date 85,023 borrowers have entered the program and 60,572 HAFA transactions have been completed, 58,969 through a short sale.  At present there are 10,911 homeowners active in this program.

The Treasury FHA-HAMP Program provides assistance to eligible homeowners with FHA insured mortgages.  There have been 13,270 trial modifications started through the program and 7,853 conversions to permanent status.

A final subsidiary program is UP which provides temporary forbearance to unemployed homeowners.  To date 21,863 homeowners have been granted forbearance with some payment required and 3,463 given forbearance with no payment.

One tool that in the HAMP program, although its use is not permitted for Freddie Mac and Fannie Mae loans, is principal reduction activity (PRA).  Servicers have been encouraged by Treasury which has recently tripled previous program incentives, to reduce the principal on loans with loan-to-value ratios over 115 percent.  Principal reduction was not widespread before introduction of PRA but there have now been 122,086 loan modifications where principal reduction has played a role and 92,777 of these have been done under PRA, 3,333 since the June report.  The average principal reduction done through PRA is 31.5 percent or $70,124.

Servicer assessments for the second quarter found no servicers in need of substantial improvement.  This is a far cry from the first few quarters these assessments were conducted when several of the largest servicers were found to be so deficient that their incentive payments were withheld.  There were seven servicers in need of moderate improvement and two, One West Bank and Select Portfolio Servicers that needed only minor improvement.  Servicers who service only for the GSEs or FHA are not subject to the assessments which are conducted by Treasury.