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Report: GSEs’ HAMP Modifications Perform Better Than Non-HAMP Mods

HAMP Home Affordable Modification ProgramThe number of delinquent mortgage loans backed by Fannie Mae and Freddie Mac that were modified through the government's Home Affordable Modification Program (HAMP) is in many cases less than half the delinquency rate of GSE loans not modified through HAMP, according to the Q4 2014 Foreclosure Prevention Report released late last week.

On Fannie Mae's modified loans completed through HAMP, 5 percent were 60 days or more delinquent just three months after the modification through the end of Q3 2014. The delinquency rate for non-HAMP loans three months after modification as of Q3 was double that rate, 10 percent. Six month after modification, 8 percent of Fannie Mae's HAMP loans with a modification through Q2 were 60 or more days delinquent, compared to 16 percent for non-HAMP loans. Nine months after modification, 9 percent of Fannie Mae's HAMP loans at the end of Q1 were 60 or more days delinquent, compared to a delinquency rate of 18 percent on non-HAMP loan mods.

For Freddie Mac, the delinquency rates are 7 percent on HAMP loans three months after modification as of the end of Q3 2014, compared to 14 percent on non-HAMP loans; 11 percent on HAMP loans six months after modification as of the end of Q2, compared to 17 percent on non-HAMP mods; and 11 percent for HAMP mods as of the end of Q1 compared to 18 percent on non-HAMP loans.

"Evidence so far suggests that participating in the HAMP program has a positive influence on the borrower’s performance in a modification," said Mark McArdle, Chief of the Homeownership Preservation Office at the U.S. Department of Treasury. "The program’s deep payment reduction, standardization, and homeowner protections likely play a role as do the incentives HAMP offers both homeowners and servicers for borrower success."

The numbers are similar going back to the third quarter of 2012. For example, the highest delinquency rate on Fannie Mae's HAMP loans three months after modification at the end of any quarter during that period was 6 percent, reached in Q2 2014. For non-HAMP modifications after three months, the highest rate has been 10 percent, reached both in Q3 and Q4 in 2014. The delinquency rate of HAMP loans three, six, and nine months after modifications has been higher than that of non-HAMP mods at the end of every quarter on both Fannie Mae and Freddie Mac loans, according to the report.

According to FHFA, nearly 1.1 million distressed homeowners have been offered a HAMP modification since April 2009, when Treasury and HUD started the program. Out of those, approximately 638,200 homeowners received permanent modifications. As of the end of the fourth quarter, about 7,700 homeowners were currently involved in a trial HAMP modification.

Nearly 960,400 homeowners have received permanent loan modifications through the GSEs' proprietary modification programs (non-HAMP) since October 2009, including 36,700 in the fourth quarter, according to FHFA.

The Treasury and Department of Housing and Urban Development (HUD) launched HAMP in 2009 as part of its Making Home Affordable initiative to provide relief for homeowners facing financial hardship by reducing monthly payments to affordable levels through lowered interest rates and modified loan terms.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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