HAMP Servicers Put Nearly 300,000 in Permanent Mods
By: Carrie Bay
The Treasury Department released April data for the administration’s Home Affordable Modification Program (HAMP) Monday, showing that permanent modifications have been initiated for 299,092 struggling homeowners. That’s an increase of 68,000 or almost 13 percent over March.
Of the nearly 300,000 permanent loan restructurings granted, 3,744 have been cancelled. Eighty-one of those cancellations occurred because the borrower paid off the loan. The remaining are the result of re-defaults.
“The number of homeowners receiving significant relief through a mortgage modification continues to rise,” commented Phyllis Caldwell, chief of Treasury’s Homeownership Preservation Office. “Our focus now is on improving the homeowner experience and holding servicers accountable for their performance.”
Last week, as part of a continued effort to improve servicer performance, the administration hosted a summit with representatives from participating mortgage servicing companies to discuss ways to move qualified homeowners into permanent modifications, while improving homeowners’ HAMP experience and still maintaining the pace of new trial modification starts.
As of April 30, of the 1.7 million delinquent borrowers the Treasury considers eligible for HAMP, trial offers have been extended to 1.4 million and 1.2 million trial mod plans have been started.
The administration has outlined for servicers its plans to begin publicly reporting more detailed performance measures. By July 2010, this reporting will include the eight largest servicers and will focus on servicer compliance, program execution, and homeowner experience, Treasury explained in a statement to the press.
However, a few new metrics have already found their way into this month’s statistics. New in the latest HAMP progress report is information about servicer-specific conversion rates to permanent modifications and servicer performance in giving homeowners timely decisions. The data show that there is wide variation among servicers in these areas, and the Treasury said it only illustrates the need for greater transparency regarding servicer performance.
Treasury reports that Ocwen Financial and HomEq Servicing have the highest permanent mod conversion rates at 83 percent. These two servicers base their HAMP trial evaluations on borrowers’ verified income, rather than stated income, which likely explains, at least in part, how they are able to move borrowers into permanent restructurings so quickly.
Beginning June 1, all participating servicers will be required to obtain necessary borrower documentation and verify income upfront, before a trial is initiated. Historically, most servicers have pushed the verification piece to later in the process, after the borrower successfully completed their trial payments but before the mod was converted to permanent status. Treasury officials say the new front-end verification procedure will speed up the process of transferring homeowners to a permanent mod plan.
The nation’s four largest banks all sit in the 20 percentile range when it comes to permanent conversion rates and are currently using the stated income path for trial evaluations. Bank of America’s and Wells Fargo’s conversion rates are 25 percent. JPMorgan Chase has a conversion rate of 22 percent. Citi’s is 21 percent.
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