Housing Scorecard: HAMP Remains an Active Program as Crisis Recedes

The Departments of Treasury and Housing and Urban Development released their October edition of the Obama Administration's Housing Scorecard on Friday afternoon.  The report highlighted the Federal Housing Finance Agency's housing price index which posted its largest annual gain in five years and new home sales which are at the fastest pace since April 2010, near the end of the homebuyer's tax credit program.  Because of the increasing strength of the housing market the scorecard notes that 1.3 million additional homes are now above water with their mortgages. 

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.  It also includes by reference the monthly report on the Home Affordable Modification Program (HAMP) and its subsidiary programs such as the Second Lien Modification Program (2MP) and the Principal Reduction Alternative (PRA).  The current report covers information through September.

HAMP continues to be an active program even though the volume has decreased from levels in 2010 and 2011.  Since the last HAMP report an additional 15,186 homeowners have entered into trial modifications and 13,849 trial modifications became permanent.  HAMP has now initiated 1,927,625 trials since the program was initiated in April 2009 and 1,090,596 of those trials became permanent. These homeowners have reduced their first lien mortgage payments by a median of approximately $541 each month - more than one-third of their median before-modification payment - saving a total estimated $15.6 billion to date in monthly mortgage payments.

Permanent modifications continue to perform well over time.  More than 94 percent of homeowners remain in permanent modifications after six months in the program while 9.4 percent are 60 or more days delinquent.  HAMPs modifications continue to exhibit lower delinquency and default rates than proprietary modifications according to the Office of Comptroller of the Currency.

The 2MP program has now initiated almost 97,000 second lien modifications, 23,656 of which have resulted in full extinguishments of the second lien and 62,443 modifications. 

The Unemployment Program (UP) offers temporary forbearance of at least 12 months to homeowners who are unemployed.  Through September 23,307 homeowners have been granted forbearance with some monthly payment required and 3,724 forbearance without a required payment.  

PRA is available only to mortgages not owned or guaranteed by Fannie Mae or Freddie Mac.  There have been 90,851 permanent modifications using principal reduction under the HAMP program, 68,805 of which have been done through the PRA program.  Active permanent modifications done through PRA have resulted in a median principal reduction of 31.7 percent compared to a median reduction of 18.0 percent for HAMP modifications with principal reductions done outside of PRA.  There have been 3,865 PRA trial modifications started since the last report and 3,070 permanent modifications.

Just over 100,000 transactions have been initiated under the Home Affordable Foreclosure Alternatives Program (HAFA) which facilitates short sales and deeds-in-lieu of foreclosure.  Competed HAFA transactions include 73,536 short sales and 1,887 deeds-in-lieu.  The bulk of completed transactions - 50,561 - were on privately owned mortgages, 19,807 were portfolio mortgages, and 5,055 were mortgages owned or guaranteed by one of the government sponsored enterprises (GSEs).

Most servicers now appear to be performing at or above HAMP standards. One such standard is that servicers must complete permanent modifications before a borrower's delinquency exceeds 120 days receive to receive full financial incentives.  All of the large services now meet or exceed that standard.

Performance is a little more ragged for a second standard under which servicers are directed to establish Right Party Contact (RPC) with homeowners of delinquent HAMP eligible loans and then evaluate the homeowners' eligibility for HAMP.

Finally, effective June 1, 2010, all trials must be started using verified income documentation. Of eligible trials started on or after June 1, 2010, 86% have converted to permanent modification with an average trial length of 3.5 months.