Modification numbers and new Unemployment Tool

[davephx]

Modification Numbers Are A Total Sham
October 25, 2009 Business Insider Report

Mortgage expert and one-time Fannie Mae Chief Credit Officer Edward Pinto blasts the claim that 500,000 homeowners have entered into HAMP (Home Affordable Modification Program).

Based on comments being made by industry participants and program results to date, HAMP is rapidly becoming: I will pretend to modify your loan if you pretend that you will make the payments.

On October 9 Treasury Secretary Geithner announced that the Obama administration’s HAMP had enrolled its 500,000 participant.

However, only about 1200 borrowers have entered the permanent modification phase; with the balance being in the 3-5 month trial period. This is in spite of the fact that there were 200,000 trials in progress back in July.

The reason for this snail like progress is, in an effort to reach its previously announced target of 500,000 modifications by November 1, program documentation guidelines were loosened. According to Michael Young, vice chairman of the Mortgage Bankers Association, 99% of the loan modification packages are incomplete. This has led to speculation that many of the 500,000 will never submit the necessary documentation or will not qualify.

(Davephx notes - but the reason is they are not sending out the documentation packages and/or losing the data after resending in many many times!)

Also of concern is the expected dropout of a sizable number of qualified borrowers who fail to make all the payments required during the trial period. (Unture at least from the reports on loansafe)

This fear has been heightened by the concern of some servicers that borrowers will use the trial period to game the foreclosure process and delay their own foreclosures by another 5 or 6 months.

Finally, in an effort to get more modifications approved, unemployment compensation will be counted.

The number of permanent modifications resulting from these 500,000 trial modifications could be low as 100,000-200,000. Finally, at a 50% ultimate redefault failure rate, only 50,000-100,000 performing loans will result. At this success rate, it is mathematically impossible for the administration to meet its announced goal of keeping 3 to 4 million Americans in their homes by preventing avoidable foreclosures with loan modifications . To do so would require putting 15 -30 million loans into trial modifications to reach the stated goal.

davephx comments: The 50% redefault rate is not for HAMP's but prior mods that often increased the payment amounts. A critical factor in reducing redefaults is the 2MP program which virtually no servicer or any have elected to participate in since the incentives are so low. I have seen unvarified report of 1 servicer participating but not clear for sure if even that one is.

davephx notes: ON October 23,2009 the Dept of Labor announced a new unemployment benefit tool website to project unemployment income from mortgage modification purposes.

[heidi79]

dave, where can we find more info on the 2mp program? ur articles are very helpful.

[flagirl4444]

Also of concern is the expected dropout of a sizable number of qualified borrowers who fail to make all the payments required during the trial period. (Unture at least from the reports on loansafe)

I don't think the posters at loansafe are an accurate representation of everyone who applies for a loan mod. On this site you only get the perspective of those who are really trying and fighting to save their homes, so obviously the vast majority of posters here do make their trial payments on time. There are obviously many other people in trial modifications who fail to pay on time. There are people who don't intend to stay in their homes and apply for a mod to delay foreclosure. There are also people who do want to stay, but end up losing their income during the trial period, or those who enter the trial and realize they can't afford the payments after all, or those who decide they just don't want to. You're only getting the perspective of a small sampling of one type of borrower here in this forum. Most of those who don't make their trial payment wouldn't come to this site.

[davephx]

flagirl4444 Good points. I agree.

heidi79 - No recent info on 2MP. Last news article a few months ago that there were no participants and Treasury was negotiating with the largest holders of 2nds. But heard nothing more. It is great - automatic down to 1-2% interest if get HAMP.

There is one report here that loan person said they were participating in 2MP, Wells as I recall. But no one else with the servicer reports this so not sure how accurate it is.

Details are at https://www.hmpadmin.com/portal/prog...cond_lien.html

But on October 20, 2009 in a blog:
Steve Bush replied:
Are there any accounts of ANY servicer/lender taking advantage of the second lien program. I cannot find any.

[heidi79]

thanks for your reply dave, that clears up a lot, just saw your post (i guess i dont get notifications on all replies)

[imlars]

Originally Posted by davephx

flagirl4444 Good points. I agree.

heidi79 - No recent info on 2MP. Last news article a few months ago that there were no participants and Treasury was negotiating with the largest holders of 2nds. But heard nothing more. It is great - automatic down to 1-2% interest if get HAMP.

There is one report here that loan person said they were participating in 2MP, Wells as I recall. But no one else with the servicer reports this so not sure how accurate it is.

Details are at https://www.hmpadmin.com/portal/prog...cond_lien.html

But on October 20, 2009 in a blog:
Steve Bush replied:
Are there any accounts of ANY servicer/lender taking advantage of the second lien program. I cannot find any.

The only lender I have seen willing to do anything with the second lien was NationStar. Once the first loan was coded for the HAMP they were willing to match the reduction on the second. Both loans were with NationStar.

[MyHAMP]

Originally Posted by davephx

However, only about 1200 borrowers have entered the permanent modification phase; with the balance being in the 3-5 month trial period.

Hey, davephx, great article!

And I thought that the entire balance has already been denied..