More than 85 percent of mortgage loans are now covered by the Obama administration’s Home Affordable Modification Program, meaning loan servicers must determine whether foreclosing on a home might prove more costly than offering a loan modification to a troubled borrower.
A total of 47 loan servicers were participating in the HAMP program at the end of August, up from 38 in July, and the program is on track to meet a goal of 500,000 loan modifications by November, the Treasury Department said in releasing its latest report on the performance of participating loan servicers.
At a congressional hearing today, a Treasury Department official acknowledged that there’s room for improvement in the program, which critics say will do little to help stem the rising tide of foreclosures driven by increased unemployment.
One in five of the 3 million borrowers the government estimates are eligible for HAMP have been offered trial modifications, the government said in its second monthly report on the performance of HAMP loan servicers.
Four loan servicers — Saxon Mortgage Services Inc., Nationstar, GMAC Mortgage Inc. and J.P. Morgan Chase — have begun trial loan modifications on at least 25 percent of loans they service that are 60 days or more delinquent and HAMP-eligible.
But some other large servicers, including Bank of America and Wells Fargo, have made offers to a smaller percentage of eligible borrowers.
Bank of America, which has the largest number of eligible 60-day-delinquent loans among loan servicers participating in the HAMP program — 835,000 — had started trial modifications on only 7 percent of those loans through August, the report said.
Wells Fargo, the third-largest servicer participating in the HAMP program, had initiated trial modifications on 11 percent of the 292,000 60-day-delinquent loans the Treasury Department said were HAMP-eligible.
All in all, participating HAMP loan servicers had started trial modifications on 12 percent of the 3 million 60-day-delinquent loans that the Treasury Department has identified as potentially eligible for HAMP, up from 9 percent in July, the report said.
Many other loans, including those not yet in default, are also eligible for the HAMP program, but the Treasury Department is using the percentage of trial modifications initiated on 60-day-delinquent loans as a metric for comparing the performance of loan servicers.
All told, offers of trial modifications have been extended to more than 571,000 borrowers, and 360,000 trial modifications are under way, the Treasury Department said.
‘Scaling up’ HAMP
There are "clear signs" that $75 billion in financial incentives offered to loan servicers and borrowers under HAMP are having "a substantial effect," and that the program will hit a target of 500,000 trial modifications by Nov. 1, Assistant Secretary for Financial Institutions Michael S. Barr said in his prepared testimony to a housing subcommittee of the House Financial Services Committee.
Barr said three challenges remain in "scaling up" the program: capacity, transparency and borrower outreach.
Loan servicers will have to add more staff than previously planned, expand call-center capacities, provide a process for borrowers to escalate servicer performance and decisions, bolster training of representatives, enhance online offerings, and send additional mailings to potentially eligible borrowers, Barr said. …CONTINUED