HAMP Limps Through June

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The government's HAMP mortgage modification continued to struggle in May, though the number of loans made permanent appears to be stabilizing. Like in the prior few months, in June there were more cancellations in the program than new trials and loans made permanent combined. In general, last month's report (.pdf) indicates that the program showed very little progress.

Most of June's data can be summed up by the following chart, which shows trial modifications started, permanent modifications started, and total cancellations (a new line I added this month):

hamp chart 2010-06.PNG

First, let's look at the yellow line for trials started. It continues to decline each month. In June, the number of new trials fell by 35%. The slightly good news is that 51,200 loans were made permanent in June, slightly more than in May. It was still fewer than in February through April, however.

Also sort of positive is that there were fewer total cancellations in June than in April and May. Last month 91,118 trial modifications were cancelled, and 2,466 permanent modifications were cancelled. Of course, even though that was an improvement compared to the dismal number of cancellations in April and May, June's total still easily overshadowed the sum of new trials and modifications made permanent.

In the report, the Treasury highlighted the statistics that approximately 45% of homeowners who saw their HAMP modification cancelled by the eight biggest servicers entered alternative modifications with those servicers. For whatever reason, many homeowners are finding it easier to utilize private modification programs than HAMP. Oddly, it also says that fewer than 2% of cancelled trials went into foreclosure, which means the other 53% must have participated in short sales, some other foreclosure prevention strategy, or figured out a way to afford their payments.

This month, the Treasury also provided delinquency data for its permanent HAMP modifications. So far, their performance isn't looking too bad:

perm mod delinquency 2010-06.PNG

Of course, it's important to remember that many of these modifications include payment hikes each year for several years that will make it harder for borrowers to afford them. This will lead to some re-defaults. And at this time, none of those permanent modifications shown have been permanent for more than one year. So it's fairly likely that these delinquency rates will rise in the months to come.

The Treasury also released its housing scorecard for July (.pdf) today. Interestingly, it shows a more successful government mortgage modification effort than HAMP: the HOPE Now program. That was created in 2007 under the direction of President Bush's Treasury Secretary Hank Paulson. In June, although only 51,200 HAMP modifications went permanent, HOPE Now had 112,100 new modifications. Similarly, in May, HAMP had 47,700 permanents, while HOPE Now had 103,100 new modifications. Again, this appears to indicate that the problem isn't really mortgage modifications, but HAMP in particular.

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Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.
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