New HAMP Report Disappoints, as Half Fall out of Trial Program

The administration released new numbers Friday on its principal foreclosure prevention initiative, the Home Affordable Modification Program (HAMP). Housing analysts and market observers say the results are disappointing at best.

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The ""latest performance report"":http://www.financialstability.gov/docs/JulyMHAPublic2010.pdf shows that nearly half of the homeowners approved for trial modifications have fallen out of the program. As of the end of July, 616,839 HAMP trials have been cancelled, out of the 1,307,489 trials started since the program began.

Assistant Treasury Secretary Herb Allison says servicers have been working through a backlog of aged trials from when servicers were accepting borrowers into the program without verifying income and other critical requirements.

He said decisions on remaining aged trials â€" whether to convert to a permanent modification or drop the borrower from the program â€" will be made over the next couple of months. There are currently 255,934 HAMP trials classified as ""active.""

Servicers have also canceled 12,640 permanent HAMP mods because the borrower has missed three or more consecutive monthly payments. Another 272 permanents have been closed because the borrower was able to pay off their loan.

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During the month of July, servicers converted just 36,695 HAMP restructurings to permanent status, bringing the total number of active permanent mods to 421,804. That's up 11 percent from 389,198 the month before, but the monthly conversions are showing a significant slow-down, considering growth in permanent modifications averaged more than 50,000 a month throughout the first half of this year.

On a call with reporters, federal officials touted the government’s foreclosure prevention program as showing “progress” and “shaping a market of greater stability.” The past continues to be their benchmark of choice, rather than the present and the sheer volume of Americans who are today struggling to meet their mortgage obligations in the midst of a still-faltering economy.

Recent estimates from the ""industry alliance HOPE NOW"":http://www.hopenow.com/press_release/files/June%202010%20Data%20Release_FINAL.pdf show that there are currently nearly 4 million homeowners 60 or more days behind on their mortgage.

HUD Assistant Secretary Raphael Bostic repeatedly told media on the call, “Let’s be clear, when this administration took office, the housing market was in freefall. Over the last 18 months, that freefall has been stemmed.” To his credit, Bostic was quick to add, “I’m not saying we’re out of woods or there’s no difficult times ahead…. There are still rough patches out there … and we will remain vigilant.”

Allison also pointed out that half of the homeowners who have been booted from HAMP are receiving other assistance or have become current. Nearly 10 percent of those whose HAMP trials were cancelled have been pushed through to foreclosure, while 46 percent have received an alternative modification from their servicer.

Servicers are apparently saving more homes with their own proprietary mod plans than through the government program. ""HOPE NOW reports"":http://dsnews.comarticles/as-servicers-shift-focus-from-hamp-completed-mods-near-1m-mark-2010-08-18 that the industry completed 975,000 permanent loan modifications during the first half of 2010. Two-thirds of those were processed through servicers' own mod programs; one-third have been HAMP modifications.