The Obama administration's foreclosure prevention program appears to be running out of steam. Its April progress report (.pdf) shows that it started just 37,021 new trial mortgage modifications -- the fewest in a month since at least last June. In fact, its cancelled trials during the month far outweighed those new ones, with
162,467 122,467* failures in April, more than the total 115,173 cancelled through March. The number of permanent modifications rose, though slowly, by 68,291, now sitting at 295,348 active permanent modifications since the program was announced in March 2009. That's still well short of its goal of helping several million homeowners avoid foreclosure.
New Trials and Permanents
First, here's a chart showing its progress starting new trial modifications and bringing trials permanent:
It seems pretty clear that the program has run its course in terms of acquiring new applicants. Up to now it has offered about 1.5 million trials, of which about 20% have been made permanent. Considering the report says that only 1.7 million mortgages are eligible, it's easy to see why new trials are slowing. Unless the program finds a way to widen its net, it won't have many more borrowers left who can qualify to participate.
The program's progress bringing these trials permanent continues to be slow. It's approaching 300,000, but it's taken over a year to get there.
Cancellations Ramp Up
Perhaps the most shocking results from this report are the number of cancellations for both trial and permanent modifications. This trend was noted last month for March's data. A whopping
162,467 122,467* trial modifications were cancelled in April. This brought the number of failed trials up to 277,640. That's nearly as many as have been made permanent. To put these cancellations into context, in the first four months of 2009, only 274,090 trials have been started -- fewer than have been cancelled.
Additionally, 865 permanent modifications were cancelled in April. That might not sound like much, but it's a 30% increase in the number of total cancelled permanents, to 3,663. These modified mortgages shouldn't be experiencing problems so soon. Remember: they already had to go through a trial period. All of these permanent modifications are less than a year old. Indeed, there were fewer than 5,000 permanent modifications made through September. The fact that these borrowers are already running into problems is very worrying.
The April report contains an interesting correction. Servicers appear to be using term extension as a means for modifying mortgages more than we thought. In March, it said 38.9% of mortgages utilized that method, but in April that number jumped to 53.4%. The report notes that this is a correction. That's a pretty big mistake. The correction also shows than more than half of loans are increasing their terms to lower the payments borrowers face.
Principal reduction is still rarely being used. In April the percentage rose by 1% to 28.6% of mortgage modifications including principal forbearance. Recent efforts by the Treasury indicated that principal reduction would be used more often as a method, but it still appears to be mostly disregarded by servicers.
Report Continues to Evolve
Finally, the program's report continues to evolve. It now includes a page showing its call center volume and outreach measures -- in case you were worried the Treasury and servicers weren't working hard enough. This is likely an attempt to shift the focus of program evaluation from actual results to effort exerted.
Moreover, the main performance chart continues to change its format, as it has most months. For April it looks like this:
For March, it looked like this:
Perhaps at some point the Treasury will finally settle on a format it likes. Or perhaps not.
*Typo -- sorry about that. The analysis remains the same.
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