Most HAMP failures avoid foreclosure

Many get other loan mod, 'self cure,' or engage in short sale

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Most homeowners who have been rejected by or dropped out of the Home Affordable Modification Program (HAMP) ended up in an alternative loan modification, became current on their loan, or negotiated a short sale or deed-in-lieu of foreclosure.

According to data compiled by the U.S. Treasury Department for the eight largest loan servicers participating in HAMP, less than 15 percent of the more than 1 million borrowers who were rejected or dropped out of the HAMP program had lost their homes or were in foreclosure process at the end of July.

Although the HAMP program has been criticized for falling short of its initial goals, Obama administration officials have defended the program, saying it’s bought time even for many borrowers who didn’t receive permanent loan modifications.

Data for all participating HAMP loan servicers through August shows 1.3 million borrowers have been granted HAMP trial loan modifications since the program’s inception. Of those, 663,538 have been canceled and 202,521 are still active.

Another 468,058 borrowers had made the transition to permanent HAMP loan modifications, with 19,121 cancellations through the end of August.

The report includes a breakdown of what’s happened to borrowers who have been rejected for or dropped out of HAMP trial loan modifications offered by the eight largest HAMP loan servicers, including Bank of America, JP Morgan Chase and Wells Fargo.

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Since the program’s inception and through the end of July, the eight largest HAMP loan servicers had canceled 487,522 HAMP trial loan modifications and rejected 628,246 applications for HAMP trial loan modifications.

Among that group of 1.12 million borrowers, 37.1 percent (413,501) ended up in other loan modification programs, 15.1 percent (169,097) "self cured" by getting current on their loan, and 5.8 percent (64,393) negotiated a short sale or deed-in-lieu of foreclosure.

Through July, the eight biggest HAMP loan servicers had initiated foreclosure proceeding against 11.6 percent of HAMP rejects and dropouts (129,733 borrowers), and completed foreclosures on 3.3 percent (37,326). Those loan servicers had yet to take further action against 19.6 percent of those rejected by or dropping out of the HAMP program (218,246).

The most common reasons borrowers were rejected for HAMP trial loan modifications: their housing expenses were already below 31 percent of household income; they could not show that they were facing imminent default; or they could not produce the required documentation.

Regardless, 31.3 percent of those rejected for HAMP trial modifications ended up in an alternative loan modification (196,683 borrowers), and another 22 percent became current on their loan (138,107). Another 6.2 percent negotiated short sales or a deed-in-lieu of foreclosure (38,874).

Among those rejected for HAMP modifications, loan servicers had initiated foreclosure proceedings against 12.1 percent (76,329 borrowers), and completed foreclosures on 4.1 percent (25,768). Loan servicers had yet to take further action against 16.5 percent of those rejected for HAMP trial loan mods (103,640).

The numbers are similar for 487,522 homeowners who were granted HAMP trial loan modifications by the eight largest loan servicers, but failed to make the transition to a permanent loan modification.

The most common reasons borrowers failed to make the transition included failure to produce the necessary documentation, an inability to keep up their payments on trial loan modifications, or housing expenses that were already below 31 percent of household income.

Among HAMP dropouts, 44.5 percent (216,818 borrowers) ended up in alternative loan modifications, and 6.4 percent (30,990) dropped out because they became current on their loan. Another 5.2 percent (25,519) completed a short sale or deed-in-lieu of foreclosure.

The eight biggest loan servicers had begun foreclosure proceedings against 11 percent of HAMP dropouts (53,404), and completed foreclosures on 2.4 percent (11,558). Loan servicers had yet to take further action against 23.5 percent of HAMP dropouts (114,606).


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