Housing Scorecard Focuses on Principal Reduction Program

The February edition of the Obama Administrations Housing Scorecard was released late Friday by the Departments of Treasury and Housing and Urban Development along with the monthly report, for January, of the Making Home Affordable (MHA) program.  The scorecard notes that purchases of new homes rose, foreclosure completions continued their downward trend, and house prices were stable.

While much of the data summarized in the Scorecard has previously been reported by MND there were a few bits of news.  First, the Federal Reserve reports that homeowners' equity was up nearly $412 billion, or 4.3 percent, in the fourth quarter of 2013, reaching $10.026 trillion-the highest level since the fourth quarter of 2007.  Homeowners' equity has risen sharply since the beginning of 2012, with equity up 60 percent, or more than $3.7 trillion, during this period.  In last week's negative equity report CoreLogic had put the fourth quarter increase in equity at slightly under $3 billion and called the number of home affected virtually unchanged from the third quarter.

The Neighborhood Stabilization Program (NSP) continues to help communities across all 50 states address foreclosed and abandoned homes. During the fourth quarter of 2013, grantees report cumulative completions of newly constructed or rehabilitated housing units under NSP topping 32,000 units, while direct assistance to homeowners reached the 10,800 mark, signaling strong progress toward achieving projected activity under the NSP1, NSP2, and NSP3 programs.

 The MHA report includes information on the handful of initiatives that operate under that umbrella including the Home Affordable Modification Program (HAMP), Home Affordable Foreclosure Alternatives (HAFA), the second lien modification program (2MP) and the Unemployment program (UP).  The report this month focused on the HAMP Principal Reduction Alternative (PRA).

HAMP initiated 12,025 new loan modification trials in January, bringing the total since the program began to 2.16 million.  There were 15,729 trial modifications converted to permanent modification status since the previous MHA report for December.  Of the 1.33 million permanent modifications put in place since the program began in April 2009, 933,900 remained active at the end of January. 

Acting Assistant Treasury Secretary Tim Bowler said of HAMP, "January's MHA report shows that homeowners currently in the Home Affordable Mortgage Program (HAMP) have saved a total estimated $25.5 billion to date in monthly mortgage payments."

Homeowners currently in HAMP permanent modifications with some form of principal reduction have been granted an estimated $13.3 billion in reductions.  Loans owned or guaranteed by Fannie Mae or Freddie Mac (the GSEs) are not eligible for a HAMP PRA due to a ruling from the Federal Housing Finance Agency (FHFA) which acts as their conservator.  However, of eligible non-GSE loan that entered HAMP in January, 64 percent received a principal reduction.  Fifty-six percent of loans received a PRA reduction where the servicer received incentive payments from Treasury for providing the reduction.  The other 4 percent were done outside of HAMP requirements and without servicer incentives.  In December 56 percent of loans received a principal reduction with 47 percent meeting HAMP requirements.

MHA said while the population of loan modifications that include principal reductions is still relatively small, program data indicates that modifications with principal reduction include more homeowners seriously delinquent at the time the trial period begins, 84 percent are over 60 days in arrears, compared to 80 percent in the overall HAMP population.  Homeowners receiving principal reduction also have higher before-modification loan-to-value ratios than those without it, a median of 148 percent compared to 119 percent.

MHA's monthly report also includes data on its Quarterly Servicer Assessment.  In the fourth quarter only one servicer, JP Morgan Chase, was found to need minor improvement.  Wells Fargo Bank, N.A was found to need moderate improvement, however, their compliance results approached the level required for a determination of minor improvement. The remainder, Bank of America, N.A, CitiMortgage, Inc., Nationstar Mortgage LLC, Ocwen Loan Servicing, LLC and Select Portfolio Servicing, Inc. were found to need moderate improvement.

 "The standards set by the Making Home Affordable (MHA) program and our quarterly servicer assessments have positively impacted the mortgage servicing industry," Bowler said. "While the housing market as a whole has made significant progress, servicers still have room for improvement and Treasury will continue to press the industry to improve servicer performance.