With the slowing of loan modification activity in the last couple of years, the number of permanent loan modifications offered by the industry since the third quarter of 2007 is essentially equal to the number of liquidations completed during the same period, according to data from the Urban Institute and HOPE NOW.
The improved credit quality of mortgage loans originated post-crisis has resulted in fewer delinquencies and defaults, which in turn has resulted in a substantial decline in loan modifications industry-wide. According to HOPE NOW, the number of permanent modifications completed by the industry since Q3 2007 was 7,784,155 as of February 2016, compared with 7,987,978 liquidations completed during the same period.
According to HOPE NOW, loan modifications completed by the industry have substantially declined since 2013. In the first quarter of 2013, the industry completed an average of nearly 81,600 loan modifications per month (both through proprietary programs and through the government’s Home Affordable Modification Program, or HAMP). Just one year later, in Q1 2014, that monthly average had fallen to 44,200. For the first two months of 2016, there were about 26,800 loan mods completed per month.
Liquidations, which include both foreclosures and short sales, have also declined in the last three years or so. In 2010, liquidations peaked at about 116,600 per month for the year; by 2013, that number had fallen to 75,000 per month. For early 2016, liquidations averaged close to 40,000 per month.
The number of new active modifications completed through HAMP just experienced its first decline in Q1, falling by about 5,480 down to 26,496, according to the Urban Institute. As the program is nearing its expiration at the end of this year, cumulative permanent HAMP modifications total about 1.57 million, with the number of active permanent HAMP modifications declining to about 980,000 in Q1.
Even with the overall declines in defaults and delinquencies, some markets in the hardest hit areas are still struggling. Eric Selk, Executive Director for HOPE NOW, noted that, “As HAMP sunsets at the end of the year, it is critical for all homeowners who are experiencing difficulty with their mortgage to reach out for assistance.” Selk added, “Our data indicates that both permanent and short term solutions remain available to those who are struggling with their mortgage.”
The number of non-foreclosure solutions (modification, short sale, or deed-in-lieu) outpaced the number of completed foreclosures in Q1 by about a 3.5 to 1 ratio (319,000 compared to 91,000), according to HOPE NOW.