Inman

Loan mods up, foreclosures drop

Loan servicers participating in the government’s Home Affordable Modification Program (HAMP) boosted the number of trial and permanent loan modifications offered to borrowers in November, even as fallout from the "robo-signing" scandal put a damper on foreclosure filings.

HAMP loan servicers put 31,290 borrowers in trial loan modifications in November, a 20 percent increase from the month before, the Treasury Department said in its latest monthly HAMP report. Another 29,927 borrowers received permanent loan modifications, up 26 percent from the month before.

In a separate "housing scorecard" rounding up various statistics, the Obama administration noted that foreclosure-related filings dropped 21 percent from October to November, citing a report by data aggregator RealtyTrac that 262,339 U.S. properties were hit with foreclosure filings last month.

"While this is the biggest month-over-month decrease since 2005, the decline is likely to be temporary as lenders eventually revise and resubmit foreclosure paperwork in the coming months," the scorecard acknowledged.

Although HAMP has come under fire from a Congressional Oversight Panel, the scorecard noted that since the program was launched in April 2009, loan modifications and workouts (3.9 million) have outpaced foreclosure completions (1.7 million).

Most of those loan modifications and workouts were undertaken outside of the HAMP program.

The scorecard counts 1.8 million proprietary loan modifications made outside of the HAMP program by HOPE Now loan servicers, 1.4 million HAMP trial modification starts, and 600,000 FHA loss mitigations and early delinquency interventions.

Although many homeowners who accepted workouts have since redefaulted, the programs have succeeded in delaying foreclosures. Most homeowners who are rejected or drop out of the HAMP program end up in an alternative loan modification, became current on their loan, or negotiate a short sale or deed-in-lieu of foreclosure.

Still, the pace of HAMP modifications has slowed considerably in recent months, and the Congressional Oversight Panel overseeing the Troubled Asset Relief Program (TARP) recently estimated that it will prevent 700,000 foreclosures at most — far short of the original goal of 3 million to 4 million.

The latest report from Fannie Mae and Freddie Mac’s regulator shows the government’s Home Affordable Refinance Program (HARP) is also unlikely to meet its goals.

HARP, which was designed to help homeowners with little or no equity refinance their mortgage without triggering requirements for additional private mortgage insurance, has also fallen short of expectations.

According to the Obama administration’s housing scorecard, some 8.3 million homeowners have refinanced their mortgages since April 1, 2009, taking advantage of lower interest rates.

But only borrowers whose loans are owned or guaranteed by Fannie Mae and Freddie Mac are eligible for HARP.

According to the Federal Housing Finance Agency, Fannie Mae and Freddie Mac refinanced 5.45 million mortgages between April 1, 2009, and Sept. 30, 2010 — with 2.24 million in the first nine months of 2010 alone.

Of those refinancings, 488,000 were considered HARP refinancings, in which owner-occupants refinanced mortgages with loan-to-value ratios of between 80-125 percent. Among that group, only 20,000 borrowers had loan-to-value ratios exceeding 105 percent.

HARP was originally envisioned as helping up to 4 million homeowners.

Although loan servicers working for Fannie and Freddie have ramped up loan modifications, the mortgage guarantors continue to grow their inventories of real estate owned (REO) homes for sale.

In its most recent quarterly report, Fannie Mae said it had 166,787 REO properties valued at $16.4 billion on its books at the end of September that it needed to dispose of, up from 72,275 at the same time in 2009.

Fannie Mae foreclosed on 216,116 homes in the first nine months of the year, a 120 percent increase from the same period in 2009.

But the loan guarantor more than tripled the number of loan modifications and other workouts from the previous year, completing 350,585 in the first nine months of the year — a figure that does not include HAMP trial modifications.

The 59,759 short sales and deeds-in-lieu of foreclosure Fannie Mae completed in the first nine months of the year represented a 128 percent increase from the same period in 2009.

Freddie Mac said its REO inventory totaled 74,897 homes on Sept. 30, valuing those properties at $7.4 billion. Freddie Mac acquired foreclosed homes at a faster rate during the third quarter (39,053), then it sold them (26,336).

Freddie Mac granted 183,584 loan modifications and other workouts during the first nine months of the year, more than double the 80,683 achieved in the same period of 2009.

Short sales and deed-in-lieu transactions were also up 115 percent, totaling 27,078 in the first nine months of the year.