Good news: About 75 percent of homeowners who received trial loan modifications through President Barack Obama’s main foreclosure prevention plan are keeping up with their new reduced payments, the Treasury Department said. Bad news: 25 percent are not.
The government’s Home Affordable Modification Program (HAMP) has failed to slow down foreclosures last year, and unless they address the real issue of negative equity, 2010 loan modifications will not be any better. The number of foreclosed homes in the United States last year increased to a record 2.8 million, a 21% rise over 2008 and 120% over 2007. Foreclosures in the fourth quarter jumped 18% over the same period last year.
The Obama administration set aside $75 billion to subsidize lenders that successfully modify troubled loans by reducing interest rates, extending loan repayments, deferring principle payments for as long as five years and adjusting other mortgage terms.
Over 900,000 homeowners have started trial modifications and over 1 million offers for trial modifications have been extended to borrowers, according to the government.
At least 196,000 borrowers have missed some or all of their required payments, according to comments Treasury officials made on a conference call today and calculations from government data. An additional 115,000 homeowners who started trial repayment plans last year have either dropped out or been kicked out of Obama’s Home Affordable Modification Program, the officials said.
Borrowers granted trial loan modifications under HAMP must continue to make reduced payments for three months in order to qualify for “permanent” modifications, which provide fixed monthly payments for five years.
The median monthly payment among borrowers receiving permanent loan modifications dropped from $1,419 a month to $830, and reduced the median debt-to-income ratio from 45 percent to 31 percent, the report said.
According to the report, the top-performing HAMP loan servicers included CitiMortgage, which had active loan modifications in place on 47 percent of eligible 60-day-plus delinquent loans at the end of the year, JP Morgan Chase (36 percent) and Wells Fargo (34 percent). The nation’s largest loan servicer, Bank of America, continued to lag behind the industry average of 25 percent, with active modifications in place on 19 percent of eligible 60-day-plus delinquent loans, the report said.
HAMP, which was designed to help as many as 4 million Americans had successfully modified just 66,465 loans.
Michael Barr, the assistant Treasury secretary for financial institutions, said the government is considering changes to improve the program’s performance, such as permanently cutting outstanding loan balances where borrowers owe more than the property is worth.
“We are in the process of reviewing that now as we have been continually through the program,” Barr said on the conference call. “You have to be very careful not to design a program that would change people’s behavior across the country in a destabilizing way.”
So far, 787,231 trial modifications had been started in the Obama program through December, up from about 697,000 in November, according to the department. Permanently reduced payment plans more than doubled from 31,382 in November. The Treasury began disclosing last month how many trial revisions had been made permanent to publicly push lenders to work harder.
The report reflected an “improved pace” for both trial and completed modification plans, said Phyllis Caldwell, who runs the Treasury’s Homeownership Preservation Office.
The three-year housing slump has wiped out at least 28 percent of home values nationwide, government and industry data show. Almost 23 percent of homeowners in the third quarter owed more than their properties are worth, according to First American Core Logic.
Turning around the U.S. housing market is one of Obama’s top priorities, Lawrence Summers, the president’s top economic adviser, told reporters yesterday. The administration has put off restructuring federally controlled mortgage-finance companies Fannie Mae and Freddie Mac while they are administering the mortgage- modification program.
“There’s no question that the future structure of the housing market is going to have to be very different than the structure that led Fannie and Freddie to the point of conservatorship, but this is an issue that’s going to play out over time,” said Summers, director of the National Economic Council.
He said the Obama administration is “thinking hard” about the future of Fannie Mae and Freddie Mac, “but for now the primary focus has to be on making sure the system of housing finance” is effective.
I am not taking solice that he is thinking hard. He needs to step up and DO hard things now. Bottom line: Lenders need to write off loans that are over market value and reduce/forgive principal before any of these programs really take hold. Until then, what he is doing is a Bandaid and not enough.
In the meantime, I am still focusing on REOs rather than short sales, as banks are just not realistic enough in the early stages to write off losses and move on. They are still hanging on and making the bigger writ downs after they own it as REO. So patience is a virtue here.
And there are tons of REOs to choose from, so it’s not like you need a lot of buying systems right now. Focus on motivated lenders and their REOs, as well as in default folks who have equity. Between the two systems, you will have plenty to buy without going far.
If you are like me, and hate learning on the street of hard knocks and learn best by doing, and mirroring a pro at the same time…. then you want to give Jim a call at 800-310-7730 x2 and ask him about 3-day Lab. This is exactly why I have taught this way for over 10 years now. My students are doing great. See for yourself here.
|
|
|
|
|
 |
{ 2 comments… read them below or add one }
nice post. thanks.
Very sad…but what can we do??