New data released Tuesday by the U.S. Treasury shows that the redefault rate for the administration's Home Affordable Modification Program (HAMP) is far lower than many critics, and even some government officials, have projected, and is well below the typical industry averages.
[IMAGE] According to the Treasury's ""July Housing Scorecard"":http://portal.hud.gov/portal/page/portal/HUD/initiatives/Housing%20Scorecard%20Documents/JULY_Scorecard_1.10.pdf, the re-default rate (90 or more days past due) for homeowners in permanent modifications for at least six months is 1.7 percent. Fewer than 6 percent of the permanently modified loans at the six-month mark are 60 days past due.
It's safe to say that the lifespan of most permanently modified loans in the federal program could accurately be described as infantile at this point, seeing as how the ""government's big push"":http://dsnews.comarticles/servicers-face-penalties-ill-repute-as-administration-rallies-for-more-modifications-2009-11-30 to ramp up trial-to-permanent conversion rates took shape only about eight months ago. But HAMP's early redefault stats are making a far better showing than industry ""norms.""
""The latest figures"":http://dsnews.comarticles/regulators-point-to-improving-loan-performance-across-the-board-2010-06-24 from the Office of the Comptroller of the Currency (OCC) put the redefault rate of mortgages modified by the nation's 11 largest servicers Ã¢â‚¬" incorporating proprietary mod programs Ã¢â‚¬" at 57 percent.
A ""recent study by Fitch Ratings"":http://dsnews.comarticles/fitch-projects-steep-re-default-rates-on-hamp-modifications-2010-06-16 projects HAMP-modified loans will redefault at a rate of 55 to 75 percent. But Treasury officials say the program guidelines ensure[COLUMN_BREAK]
restructured mortgage payments are truly affordable for participating borrowers, and as a result they stand a better chance of continued success.
Homeowners in permanent modifications are receiving a median payment reduction of 36 percent, more than $500 per month, according to the Treasury's July report. Homeowners in permanent modifications are guaranteed lower payments for five years as long as they remain current. After five years, then the loan structure is adjusted to offer fixed terms that lock in today's low interest rates for the life of the mortgage.
Servicers added 51,205 modified loans to the permanent column during the month of June, a 15 percent increase since the previous report. Treasury says growth in permanent modifications has averaged more than 50,000 a month over the last six months. Currently there are 389,198 active permanent mods in the program.
Servicers report the number of homeowners receiving restructured mortgages has increased to a new total of 2.95 million, including more than 1.2 million homeowners in HAMP trials and nearly 400,000 benefitting from FHA loss mitigation activities.
However, cancellations from HAMP trial plans remain high, as many borrowers who received temporary modifications have not been able to verify their income or have missed trial payments.
As of the end of June, 520,814 HAMP trials had been cancelled Ã¢â‚¬" more than have been converted to permanent status.
However, data from the eight largest servicing shops show that just over 50 percent of homeowners not granted a permanent HAMP mod are offered a proprietary modification or are able to bring their loan current. Fewer than 2 percent have gone to foreclosure sale, while 2.4 percent, or 8,245 borrowers, have accepted a short sale alternative.