Treasury Corrects Its Math for HAMP Redefaults

When the Treasury Department released its ""latest progress report"":http://dsnews.comarticles/treasury-hamp-redefault-rate-less-than-2-after-six-months-2010-07-20 for the Home Affordable Modification Program (HAMP) in late July, it showed the redault rate[IMAGE]for permanently modified loans to be around the two percent mark â€" 5.9 percent 60 or more days past due after modification, and 1.7 percent 90 or more days delinquent.

An ""outcry from analysts"":http://dsnews.comarticles/barclays-argues-treasury-report-on-hamp-redefaults-is-misleading-2010-07-21 â€" and some of you discerning DSnews.com readers â€" immediately followed, questioning the validity of the government's math.

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Within a few days, the Treasury had pulled those numbers from its online reports and replaced them with the following statement: ""Since the July 20th release of the HAMP report, program administrator Fannie Mae has reported an issue in its reporting of permanent modification performance. Fannie Mae is revising the data, and Treasury has retained a third-party consultant to provide additional review and independent validation.""

Last week, the Treasury quietly and stealthily ""corrected its redefault assessment"":http://www.treasury.gov/press/releases/tg819.htm. The revised numbers are that 10 percent of six-month-old permanent mods are 60-plus days delinquent, and 6 percent are 90-plus days delinquent.

Research analysts say that's still too low and the redefault rate will surely go higher the longer the program is in place. Up until six months ago, permanent modifications had been offered to just about 100,000 borrowers.

The analysts at ""Barclays"":http://www.barcap.com are predicting a 60 percent redefault rate over HAMP's lifetime. A separate study by ""Fitch Ratings"":http://www.fitchratings.com projects 55 to 75 percent.