This page is no longer maintained. HAMP turned out not to have a major effect on the foreclosure crisis.
7 Mar 2011.
Short term effect on liquidations: HAMP's biggest effect so far has been to temporarily slow foreclosures, due to a freeze imposed on all loans in trial modifications. But the net increase of 6 thousand loans so protected in January is small compared to about 75 thousand monthly foreclosure sales.
Short term effect on delinquencies: HAMP is currently helping to decrease the backlog of seriously delinquent loans: As trial modifications successfully convert to permanent, delinquent loans are recorded as “curing” to current. However the number of active permanent modifications went up by only 17,000 in January, which is almost insignificant in the face of millions of seriously delinquent loans.
Long term effect on foreclosures: For now it would appear that the number of modifications might reach about 600 thousand. Something like half will eventually re-default, leaving perhaps 300 thousand genuine successes. That is a small fraction of the millions of loans now seriously delinquent or in the foreclosure process. (Background on HAMP.)
Clippings below covered through 31 Jan 2011.
Borrower debt (31 Jan 2011) Back-end debt-to-income ratio (ratio of total monthly debt payments to monthly gross income), median after modification, 63%.
Disposition of cancelled trials (6 Mar 2011)
Through December, the outcome of trial plan cancellations was home forfeiture for 27% of homeowners (“in the process of” a short sale, deed in lieu, foreclosure start or foreclosure completion). This fraction is rising over time.
|Month||Short/DIL||Foreclosure start||Foreclosure completion||Total forfeiture|
HAFA and 2MP (25 Oct 2010) These programs went nowhere. According to SIGTARP, “As of September 30, 2010, approximately $1.6 million in TARP funds had been paid to investors, borrowers, and servicers in connection with 342 short sales or deeds-in-lieu completed under HAFA ….
As of September 30, 2010, approximately $10,500 in TARP funds had been paid to servicers in connection with 21 modifications under 2MP.”
Servicers may not be motivated (20 Jul 2010) When a borrower fails to make payments, servicers are still required to deliver those payments to bond holders. They often borrow the money to do so. More than one source says the borrowing costs on delinquent payments outweigh the incentives paid not to foreclose under HAMP. It is possible, then, that some servicers are not really motivated to make the program a success.
28 Jul 2009. Reuters.
“Subprime mortgage companies warn on U.S. foreclosures. By Al Yoon”
“Companies forming the Independent Mortgage Servicers Coalition … group collects and distributes payments on more than $700 billion in loans, according to its leader, Carrington Mortgage Services of Santa Ana, California. …
Implementing [Home Affordable] means giving delinquent homeowners more time fix their loans, which to servicers will the boost costs of extending payments to investors as contractually promised. …
Bruce Rose, chief executive officer and general partner of Greenwich, Connecticut-based Carrington Capital Management, LLC, which owns CMS. Rose attended the [recent Home Affordable] meeting with Treasury. …
The costs of borrowing to finance delinquent payments to bond investors far outweigh expected revenue from incentives paid by the government, Rose said. …
S&P ratings and bank credit lines give servicers incentives that run counter to public policy, he said. To reduce discounts assessed by rating companies, and to lower borrowing costs from banks, servicers would have to foreclose faster, not more slowly, as would be required under Obama's plan, he said.”
12 Aug 2009. Credit Slips.
“HAMP–Is It Really All About the Money? by O. Max Gardner III”
“The New York Times reported about ten days ago that the HAMP mortgage servicers were reluctant to engage consumers in modifications because the companies collect such lucrative fees on delinquent mortgage loans. … As a consumer's bankruptcy lawyer, I have made a very good living filing adversary proceedings against mortgage servicers for the misapplication of mortgage payments and for the unlawful imposition of fraudulent legal fees and other charges. … in many cases the financial incentives for the servicers are totally inconsistent with the financial rights of the bond holders in a securitized trust.
The real problem for servicers is not just a desire to make more money but their almost total inability to comply with HAMP. The problem with the HAMP plan is that it fails to take into account the normal obligations of servicers under their respective Pooling and Servicing Agreements. In most cases, a servicer is obligated to advance to the Trustee for the securitized mortgage trust the monthly principal and interest payments for every loan that has defaulted. This can be a massive monthly financial obligation. Most servicers are not allowed to recover these “P & I Advances” until the property is foreclosed and then sold as Real Estate Owned (REO). More importantly, HAMP forces mortgage servicers to act as “full-document” mortgage loan originators. Most mortgage servicers have no experience, training or knowledge about how to originate a mortgage loan. Yet, this is exactly what HAMP is asking them to do. The $1,000 HAMP modification fee and the annual $1,000 success for performance HAMP fees do not even begin to cover the expenses the servicers must incur in order to fully comply with the HAMP “origination” rules. As a result, the so-called “financial incentives” for servicers to modify loans are totally unrealistic and fail to take into account how this system really functions.
Accordingly, in the final analysis it really is about the money but just a lot more and for different reasons than has been reported by the media. There was “no hope” for the “Hope Now” program and there is no chance to ramp up the HAMP.”
19 Jan 2010. US Treasury press release.
“Making Home Affordable Program: Servicer Performance Report Through December 2009”
28 Jan 2010. Treasury Supplemental Directive 10-01.
“Home Affordable Modification Program – Program Update and Resolution of Active Trial Modifications”
“A significant program change is a requirement for full verification of borrower eligibility prior to offering a trial period plan. Effective for all HAMP trial period plans with effective dates on or after June 1, 2010, a servicer may only offer a borrower a trial period plan based on verified income documentation in accordance with this Supplemental Directive. …
This Supplemental Directive provides guidance to servicers of first mortgage loans that are not owned or guaranteed by Fannie Mae or Freddie Mac (Non-GSE Mortgages). …
Supplemental Directive 09-01 gave servicers the option of placing a borrower into a trial period plan based on verbal financial information obtained from the borrower, subject to later verification during the trial period. Effective for all trial period plans with effective dates on or after June 1, 2010, a servicer may evaluate a borrower for HAMP only after the servicer receives the following documents, subsequently referred to as the “Initial Package”. The Initial Package includes:
Within 10 business days following receipt of an Initial Package, the servicer must acknowledge in writing the borrower’s request for HAMP participation by sending the borrower confirmation that the Initial Package was received, and a description of the servicer’s evaluation process and timeline. If the Initial Package is received from the borrower via e-mail, the servicer may e-mail the acknowledgment. Servicers must maintain evidence of the date of receipt of the borrower’s Initial Package in its records. …
Following underwriting and a determination that the borrower qualifies for a HAMP trial modification, servicers will place qualified borrowers in a trial period plan by preparing and sending a Trial Period Plan Notice to the borrower describing the terms of the trial modification and the payment due dates. Borrowers who make all trial period payments timely and who satisfy all other trial period requirements will be offered a permanent HAMP modification.”
16 Feb 2010. US Treasury press release.
“Making Home Affordable Program: Servicer Performance Report Through January 2010”
[Note that numbers reported earlier have been revised]
[This last graph, and a strong emphasis on 60+ day delinquencies, are new in this report.]
undated; accessed 20 Feb 2010. Making Home Affordable web site.
12 Mar 2010. Making Home Affordable website.
“Making Home Affordable Program Servicer Performance Report Through February 2010”
“of the 6.0 million borrowers who are currently 60 days delinquent, 1.8 million borrowers are eligible for HAMP.”
[Redoing the success rate calculation.
26 Mar 2010. Treasury announcement.
“Making Home Affordable Program Enhancements to Offer More Help for Homeowners”
“HAMP pay-for-success incentives will be expanded to include borrowers with FHA loans. …
Temporary Assistance for Unemployed Homeowners While They Search for Re-Employment
Requirement to Consider Alternative Principal Write-down Approach and Increased Principal Write-down Incentives
Improvements to Reach More Borrowers with HAMP Modifications
Helping Homeowners Move to More Affordable Housing
26 Mar 2010. Treasury release.
“Supplemental Directive 09-05 Revised: Update to the Second Lien Modification Program (2MP)”
“No later than 120 calendar days after the later of (i) the effective date of the 2MP SPA Service Schedule, (ii) the date a servicer receives the first and second lien matching information from LPS or (iii) the date of the implementation of the 2MP reporting and payment processes (each, a Trigger Event), a servicer must offer a 2MP trial period plan or 2MP modification, as applicable to any eligible second lien borrower whose corresponding first lien was modified under HAMP at any time prior to the Trigger Event and the first lien modification remains in good standing.”
15 Apr 2010. Treasury website.
“Making Home Affordable Program Servicer Performance Report Through March 2010”
“of the 6.0 million borrowers who were 60 days delinquent in the 4th quarter of 2009, 1.7 million borrowers are eligible for HAMP.”
[Back-end debt-to-income ratio (ratio of total monthly debt payments to monthly gross income): Median before modification, 77.5%; after 61.3%.]
[Updating the success rate calculation.
11 May 2010. Treasury supplemental directive 10-04.
“Home Affordable Unemployment Program”
“A borrower who is currently in a HAMP trial period plan and becomes unemployed may seek consideration under UP if the borrower was not seriously delinquent (as defined above) as of the first payment due date of the HAMP trial period plan. …
During the UP forbearance plan, the borrower’s monthly mortgage payment must be reduced to an amount that is no more than 31 percent of the borrower’s gross monthly household income. In determining gross monthly income, the servicer may rely on stated income provided by the borrower or may require documentation of income. At the discretion of the servicer, the borrower’s monthly mortgage payments may be suspended in full.”
17 May 2010. Treasury website.
“Making Home Affordable Program Servicer Performance Report Through April 2010”
“Servicers who started trials with verified documents generally posted higher conversion rates than servicers who allowed borrowers to enter trials with stated income. With recent Treasury guidance, all servicers are now verifying borrower documents before trial start.
Using stated income upon trial starts, the four largest participating servicers have conversion rates below 30%.”
“Back-End Debt-to-Income Ratio” (BEDTIR) is the “Ratio of total monthly debt payments (including mortgage principal and interest, taxes, insurance, homeowners association and/or condo fees, plus payments on installment debts, junior liens, alimony, car lease payments and investment property payments) to monthly gross income.” The median BEDTIR for HAMP participants fell from 80% before modification to 64% after.
21 Jun 2010. Treasury website.
“Making Home Affordable Program Servicer Performance Report Through May 2010”
20 Jul 2010. Treasury website.
“Making Home Affordable Program Servicer Performance Report Through June 2010”
“Servicers Continue to Work Through Aged Trial Population
New This Month: Performance of Permanent Modifications
Select Median Characteristics of Permanent Modifications … Back-End Debt-to-Income Ratio … after modification … 63.7% …
Homeowners Whose HAMP Trial Modification Was Canceled in the Process of … short sale 2.4% … foreclosure starts 8.9% … foreclosure completions 1.3%”.”
21 Jul 2010. BarCap report via FT Alphaville.
“BarCap vs HUD on HAMP. Stacy-Marie Ishmael”
“In a report headlined “Misleading Reporting of Mod Performance in the June HAMP Scorecard”, analysts Sandeep Bordia and Jasraj Vaidya deplored the reporting of the latest HAMP loan performance data by the US Department of Housing and Urban Development. …
Here’s their take on the table (emphasis in the original):
Figure 1 shows loans that are 60+ /90+ days delinquent at the end of 3,6,9 months by quarter of modification. However, in the report, a footnote to the table states that “a HAMP permanent modification is canceled for non payment if it is more than 90 days delinquent”. We interpret this to mean that these loans are removed from the percentage delinquent numbers reported in this table. The report also tells us that 8,628 loans have been cancelled from the permanent HAMP modification stage till date (8823 permanent mods cancelled – 195 paid off). From Figure 1, we can approximate the number of 60+ borrowers today as (Q110 60+ at 3 months) + (Q409 60+ at 6 months) + (Q309 60+ at 9 months). Similarly, we can estimate the 90+ loans as of the latest date. These numbers turn out to be 8,205 60+ loans and 2,489 90+ loans. We believe that the total number of loans that have gone bad after the permanent mod stage is probably closer to the 60+ loans estimated above, plus the cancelled permanent modifications, which more than doubles the absolute number from 8,205 to 16,833 bad loans. The report does not contain enough information to allow us to calculate true redefault rates by quarter of modification, but we would expect them to exceed the level reported in Figure 1. …
Given the nature of reporting available for most HAMP mods in Loan Performance, where only permanent mods are reported, we find that a more consistent approach is to use mod rates based on permanent mods and redefaults from permanent mods. On that definition, we believe that our base case expectation of about 60% lifetime redefaults on HAMP are still adequate.
20 Aug 2010. Treasury website.
“Making Home Affordable Program: Servicer Performance Report Through July 2010”
22 Sep 2010. Treasury website.
“Making Home Affordable Program Servicer Performance Report Through August 2010”
25 Oct 2010. Treasury website.
25 October 2010. SIGTARP.
“Quarterly Report to Congress October 26, 2010”
As recently as October 5, 2010, in the Retrospective, Treasury asserted no fewer than three times that “[e]ighteen months into the program, HAMP has helped more than 1.3 million homeowners by reducing their monthly mortgage payments to more affordable levels.” Furthermore, Treasury makes the remarkable argument that every single one of these modifications is a success, including the nearly 700,000 that have failed and more than 173,000 that remain in limbo, claiming that “every single person who is in a temporary modification is getting a significant benefit” from temporarily reduced payments. Put another way, in the absence of benchmarks for HAMP’s original goal, to “help up to 3 to 4 million at-risk homeowners avoid foreclosure . . . by reducing monthly payments to sustainable levels,” Treasury is reduced to now trying to define every single one of the nearly 700,000 HAMP trial modification failures as “successes.”
Treasury’s decision to declare such uniform success for so many failures disregards the harm and suffering that often accompany failed trial modifications. In Section 3: “The Economics of Loan Servicing,” SIGTARP has provided some examples of the harms that failed modifications have inflicted, including complaints received through SIGTARP’s Hotline. There have been many published reports of similar and more extreme examples, such as news website ProPublica’s recent survey of HAMP participants. They all paint a similar portrait of many HAMP borrowers, often already contending with other hardships, who end up unnecessarily depleting their dwindling savings in an ultimately futile effort to obtain the sustainable relief promised by the program guidelines. Others, who may have somehow found ways to continue to make their mortgage payments, have been drawn into failed trial modifications that have left them with more principal outstanding on their loans, less home equity (or a position further “underwater”), and worse credit scores. Perhaps worst of all, even in circumstances where they never missed a payment, they may face back payments, penalties, and even late fees that suddenly become due on their “modified” mortgages and that they are unable to pay, thus resulting in the very loss of their homes that HAMP is meant to prevent.
While it may be true that many homeowners may benefit from temporarily reduced payments even though the modification ultimately fails, Treasury’s claim that “every single person” who participates in HAMP gets “a significant benefit” is either hopelessly out of touch with the real harm that has been inflicted on many families or a cynical attempt to define failure as success. Worse, Treasury’s apparent belief that all failed trial modifications are successes may preclude it from seeking to make the meaningful changes necessary to provide the “sustainable” mortgage relief for struggling families it first promised. What Treasury deems a universal benefit, many homeowners, members of Congress, and a growing number of commentators describe as “cruel” and offering little more than “false hope.”
To combat the risk of growing mistrust that accompanies each Treasury announcement on HAMP, and in the spirit of full transparency, Treasury should acknowledge the program’s failings and finally publish meaningful goals, no matter how modest they may now appear to be when compared to the original program announcements. …
As of September 30, 2010, approximately $1.6 million in TARP funds had been paid to investors, borrowers, and servicers in connection with 342 short sales or deeds-in-lieu completed under HAFA ….
As of September 30, 2010, approximately $10,500 in TARP funds had been paid to servicers in connection with 21 modifications under 2MP. …
Principal forbearance and principal forgiveness, however, lower the interest-bearing principal balance and therefore reduce the servicer’s monthly fee.”
19 Nov 2010. Treasury.
“18 servicers have signed up for the Second-Lien Modification Program (2MP), covering nearly two-thirds of the second-lien mortgage market.”
22 Dec 2010. Treasury.