HAMP debt-to-income ratio drops to 31%

Loan mods up 75% from Q3 to Q4 '09

They represent only a small percentage of troubled borrowers, but homeowners granted permanent loan modifications under the federal Making Home Affordable Modification program have seen significant decreases in their monthly payments and debt-to-income ratios, according to the latest HAMP program report.

About one in four of the 3.3 million borrowers the Treasury Department estimates are 60 days or more behind on their mortgage payment and eligible for HAMP were enrolled in trial or permanent HAMP loan modifications at the end of December, the report said.

Active trial and permanent loan modifications increased more than 75 percent from the third quarter to the fourth, to 853,696, the report said. Of those modifications, only 66,465 were permanent, although loan servicers had approved another 46,056 permanent modfications pending borrower acceptance.

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.

Bank of America has defended its HAMP performance, saying many of the more than 1 million delinquent mortgages that it services that have been identified by the Treasury Department as HAMP-eligible are not (see story).

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