(Source: Treasury) – 1/10/2012 - Yesterday, Treasury released its latest monthly report on the Home Affordable Modification Program (HAMP), which shows that the program is continuing to help additional Americans avoid foreclosure. As of November 2011, nearly 910,000 homeowners have received a permanent loan modification through the program to help lower their monthly mortgage payments.
The standards that HAMP has put into place have helped catalyze an additional 2.6 million mortgage modifications across the industry since the program’s launch. These mortgage modifications, which have increasingly followed HAMP’s modification steps, are proving more affordable and more sustainable for homeowners than ever before. Even if a homeowner is evaluated for the program but determined to be ineligible, HAMP requires that their servicer evaluate them for all other forms of assistance. Of these homeowners, one-third have already received alternative assistance through a modification or transition program (short sale or deed-in-lieu of foreclosure). Less than eight percent have gone to foreclosure sale.
Yesterday’s report also shows that HAMP is continuing to reach those homeowners it was originally designed to help: borrowers who have a verifiable financial hardship and are no longer able to pay the mortgage on their home without some assistance. The median income of those individuals in active permanent modifications is about $46,000 a year. These homeowners have reduced their mortgage payments by a median amount of $530 each month – saving a combined total of nearly $10 billion to date.
There are about 890,000 additional homeowners who are currently eligible for assistance through HAMP. Of course, some have asked: “Aren’t there more people who are delinquent on their mortgages?” Based on survey data from participating HAMP servicers, Treasury’s HAMP report includes a chart that helps demonstrate how the total number of delinquent mortgages relates to the number of those loans that are estimated to be eligible for the program:
Of the 4.6 million estimated delinquencies reported in the MBA National Delinquency Survey for the third quarter of 2011:
About 500,000 of the currently delinquent loans are estimated to be serviced by companies that do not participate in HAMP. Treasury enlisted more than 120 servicers to participate in the program – 85 percent of the market – but there are some that have not agreed to participate.
About 700,000 are estimated to be government-owned by the Federal Housing Administration (FHA) or Veteran’s Administration and therefore eligible for assistance through other government programs.1
An estimated 500,000 were not a primary residence (non-owner occupied) at the time of origination. When the program began, the decision was made to exclude those loans so that resources could be focused on helping homeowners stay in their homes, and therefore on owner-occupied loans that meet the conforming loan limits.
About 400,000 are estimated to be jumbo loans – meaning loans whose principal amount exceeds the limit for a Fannie Mae or Freddie Mac mortgage – or loans originated after January 1, 2009.
About 1.6 million do not meet the program’s affordability standards or “net present value” (NPV) tests, are vacant properties, or otherwise don’t meet program qualifications. The affordability standard means that homeowners must currently have a mortgage payment that is greater than 31 percent of their monthly gross income to qualify. After being modified through HAMP, homeowners’ mortgage payments will be no more than 31 percent of their monthly gross income. The NPV test determines whether a modification improves the prospects of a homeowner’s loan performance and thus makes economic sense for the investor.
As a result, about 890,000 additional homeowners are estimated to be eligible for the program today. That number, of course, can change over time. For example, on an ongoing basis, additional homeowners become eligible for the program. But as we continue to reach additional homeowners and the housing market continues its difficult healing process, the number of Americans who are behind on their mortgages has fallen. This drop has contributed to a decline in the number of additional homeowners who are eligible for HAMP of nearly 50 percent:
Yesterday, Treasury released its latest monthly report on the Home Affordable Modification Program (HAMP), which shows that the program is continuing to help additional Americans avoid foreclosure. As of November 2011, nearly 910,000 homeowners have received a permanent loan modification through the program to help lower their monthly mortgage payments.
The standards that HAMP has put into place have helped catalyze an additional 2.6 million mortgage modifications across the industry since the program’s launch. These mortgage modifications, which have increasingly followed HAMP’s modification steps, are proving more affordable and more sustainable for homeowners than ever before. Even if a homeowner is evaluated for the program but determined to be ineligible, HAMP requires that their servicer evaluate them for all other forms of assistance. Of these homeowners, one-third have already received alternative assistance through a modification or transition program (short sale or deed-in-lieu of foreclosure). Less than eight percent have gone to foreclosure sale.
Yesterday’s report also shows that HAMP is continuing to reach those homeowners it was originally designed to help: borrowers who have a verifiable financial hardship and are no longer able to pay the mortgage on their home without some assistance. The median income of those individuals in active permanent modifications is about $46,000 a year. These homeowners have reduced their mortgage payments by a median amount of $530 each month – saving a combined total of nearly $10 billion to date.
There are about 890,000 additional homeowners who are currently eligible for assistance through HAMP. Of course, some have asked: “Aren’t there more people who are delinquent on their mortgages?” Based on survey data from participating HAMP servicers, Treasury’s HAMP report includes a chart that helps demonstrate how the total number of delinquent mortgages relates to the number of those loans that are estimated to be eligible for the program:
Of the 4.6 million estimated delinquencies reported in the MBA National Delinquency Survey for the third quarter of 2011:
About 500,000 of the currently delinquent loans are estimated to be serviced by companies that do not participate in HAMP. Treasury enlisted more than 120 servicers to participate in the program – 85 percent of the market – but there are some that have not agreed to participate.
About 700,000 are estimated to be government-owned by the Federal Housing Administration (FHA) or Veteran’s Administration and therefore eligible for assistance through other government programs.1
An estimated 500,000 were not a primary residence (non-owner occupied) at the time of origination. When the program began, the decision was made to exclude those loans so that resources could be focused on helping homeowners stay in their homes, and therefore on owner-occupied loans that meet the conforming loan limits.
About 400,000 are estimated to be jumbo loans – meaning loans whose principal amount exceeds the limit for a Fannie Mae or Freddie Mac mortgage – or loans originated after January 1, 2009.
About 1.6 million do not meet the program’s affordability standards or “net present value” (NPV) tests, are vacant properties, or otherwise don’t meet program qualifications. The affordability standard means that homeowners must currently have a mortgage payment that is greater than 31 percent of their monthly gross income to qualify. After being modified through HAMP, homeowners’ mortgage payments will be no more than 31 percent of their monthly gross income. The NPV test determines whether a modification improves the prospects of a homeowner’s loan performance and thus makes economic sense for the investor.
As a result, about 890,000 additional homeowners are estimated to be eligible for the program today. That number, of course, can change over time. For example, on an ongoing basis, additional homeowners become eligible for the program. But as we continue to reach additional homeowners and the housing market continues its difficult healing process, the number of Americans who are behind on their mortgages has fallen. This drop has contributed to a decline in the number of additional homeowners who are eligible for HAMP of nearly 50 percent:
Homeowners who receive help through HAMP today have a high likelihood of long-term success in the program. Eighty-three percent of the homeowners who have entered HAMP since June 2010 received a permanent mortgage modification. Last month, the Office of the Comptroller of the Currency (OCC) reported that HAMP continues to be more sustainable, meaning less likely to end in default and foreclosure, for homeowners than industry modifications in large part due to HAMP’s emphasis on deep reductions in monthly payments.
There is no easy answer to addressing the housing crisis. While there have been signs of improvement in the past year as evidenced by the year-over-year decline in newly delinquent mortgages, the market is still fragile. The rate of mortgage delinquencies is still above pre-crisis levels and remains unacceptably high. More work needs to be done.
But our efforts to help prevent avoidable foreclosures are clearly having a positive impact.
Preventing avoidable foreclosures is beneficial not only to the families affected, but also to neighborhoods as a whole, because foreclosures have adverse effects on our communities. While HAMP, which is funded through the Troubled Asset Relief Program (TARP), can continue to help additional families, under the law, Treasury can no longer launch new programs under TARP. We will, however, continue to look at ways that we can enhance HAMP to continue to help more homeowners.
Tim Massad is Assistant Secretary of the Treasury for Financial Stability.
Source: Treasury
