Permanent loan modifications increased by 45 percent in February, according to a report of the Obama Administration’s Home Affordable Modification Program (HAMP).
The U.S. Department of the Treasury and the Department of Housing and Urban Development (HUD) said lenders had granted more than 170,000 permanent loan mods since the program began in May 2009 and servicers had approved 91,800 more that were awaiting borrower acceptance.
Permanent loan mods have been increasing rapidly in the past six months. From December to January they increased 43 percent, from 66,938 to 117,302 — there were fewer than 5,000 permanent loan mods started before October 2009.
The permanent loan mods guarantee lower payments for five years, with a median savings of $518.88 a month, a median decrease of 36 percent off their monthly payment before modification, the report said. The median monthly payment fell to $837.86 from $1,430.96.
Qualified homeowners were able to reduce their housing expenses from a median 45 percent of their gross income to 31 percent. Housing expenses include mortgage principal, interest, taxes, insurance, and any homeowners association or condo fees.
The permanent modifications also decreased borrowers’ total monthly debt-to-income ratio from a median 76.4 percent to 59.8 percent. That includes the above-mentioned expenses as well as payments on installment debts, junior liens, alimony, car lease payments and investment property payments, the report said. The program requires those with a ratio of more than 55 percent to go through housing counseling.
All borrowers who obtained permanent loan modifications saw their interest rate reduced, 40.8 percent saw their term extended, and 27.8 percent received a principal forbearance.
Lenders have offered more than 1.3 million trial loan modifications to borrowers and close to 1.1 million are under way — more than 72,000 of them in February alone. Those offers mean the program’s goal of extending between 3 million and 4 million loan mod offers through 2012 is 34 percent to 45 percent complete.
Of the 6 million borrowers currently 60 days delinquent on their loans, 1.8 million are eligible for HAMP, and the government expects that number to increase through 2012. The program precludes eligibility to those who have a non-participating HAMP servicer, an FHA or VA loan, were not owner-occupied at origination, have jumbo non-conforming loans, or are vacant, among other things.
Of trials started at least three months ago, 32 percent have been approved for conversion to permanent by the loan servicer, the report said.
Homeowners have saved more than $2.7 billion overall through trial and permanent loan mods, the report said.
Of all modifications begun, 8.2 percent have been canceled; only 0.9 percent of those were permanent loan mods, the report said.
Of those receiving permanent loan modifications, 57.4 percent said that loss of income was the predominant reason they were seeking a loan mod. A little over 10 percent cited "excessive obligation," or too much debt.
Borrowers who make their monthy payments on time for a year are eligible to earn up to $1,000 applied to their outstanding mortgage balance, the report said.
Of all loan servicers participating in HAMP, GMAC Mortgage Inc. had started loan modifications on the greatest share of eligible borrowers: 53 percent. Wachovia Mortgage, FSB had started loan mods on the smallest share, 2 percent. The servicers overall had started modification on 29 percent of those eligible.
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