Latest Home Affordable Modification Report Provides New Data

The Treasury released its monthly progress report (.pdf) on its Home Affordable Modification Program, meant to prevent foreclosures through mortgage modification. It shows continued progress in the modification effort. The permanent modifications are finally beginning to materialize. They nearly doubled in January, now at 117,302 from 66,465 in December. The report also offers some interesting new data.

First, let's look at my favorite chart, which I'd argue is the most important. I wrote about this one last month, when I noted that it dropped a line I liked -- number of requests for financial information sent to borrowers. I had used that to calculate the program's success rate, since that could be thought of as the total pool of who might want a modification.

They didn't bring that statistic back, but the chart continues to evolve. Here's what it looked like for December:

Dec 2009 mort mods treas rpt v2.PNG

And here's what it looks like in this month's report, for January:

Jan 2010 mort mods treas rpt.PNG

The changes begin about four lines up from the bottom in January's version. They dropped pending permanent modifications (though you can still get this on page 7). They then added a bunch of lines. The first is "Trial Modifications Cancelled" -- the ones that failed to go permanent. They've also split up permanent modifications into total started, total cancelled, and total active.

This break down will eventually be very interesting, because it will help to define the re-default rate. It's pretty broad data, however, so it's hard to get a meaningful understanding of how high that re-default rate really is now, because we don't know the vintages of those failed modifications. If we did, we could identify if underwriting standards are getting better or worse. But we should still keep an eye on this and the trial modification cancellation statistics.

The Treasury also included another interesting chart:

Jan 2010 mort mods treas rpt 2.PNG

Remember that statistic I referred to above that got taken out last month -- number of requests for financial information sent to borrowers? In November, it was over 3 million. But this new chart indicates that only 1.7 million homeowners were ever eligible for the program. This shows lots of Americans were requesting information, but weren't ultimately eligible.

It also serves to make the Treasury's statistics look a little better. As the earlier chart I referred to above shows, 1.3 million trial plans have been offered. That means approximately 75% of eligible borrowers have received trial offers. Clearly, the Treasury wants people to conclude that banks are doing a pretty good job pushing modifications out to those who qualify.

Of course, this raises a separate objection: why are only 1.7 million out of the 5.6 million troubled homeowners eligible? And if only 1.7 million Americans have been eligible up to now, then it's hard to imagine how the Treasury will reach its goal of offering "reduced monthly payments for up to 3 to 4 million at-risk homeowners" through the program. If that's really its objective, then the way the program works should be re-examined.