Yesterday, we learned that the Treasury made a mistake in reporting the number of delinquent borrowers who have permanent modifications under their HAMP mortgage modification program. The June report (.pdf) contained a new chart detailing the performance of these reworked mortgages. It looked good, a little too good. Analysts began asking questions, and Treasury soon realized that there a data discrepancy. How big of a mistake was it?
We still don't know. At this time, Treasury will only say that the mistake was due to "inconsistent reporting." It's currently working to get the numbers right. You may recall the chart in question from this post on the HAMP's June performance:
It looks pretty good, right? 90-day delinquencies never exceed 5%, which is extremely impressive given the likely credit quality of these individuals. Yet, part of the reason for this could be that cancelled modifications are missing from the balance. That's one explanation provided by Shahien Nasiripour of the Huffington Post. He explains what some Barclays analysts found:
The problem they identified had to do with how Treasury was calculating the rate. In the report, Treasury stated that a "HAMP permanent modification is canceled for nonpayment if it is more than 90 days delinquent." To the Barclays Capital analysts, it appeared that Treasury was thus not including those homeowners with five-year modifications who were kicked out of the program. More than 8,600 homeowners have been bounced from HAMP.
The 8,823 cancellations might sound like a lot, but really it's a not much, considering it's out of 398,021 modifications made permanent. This means just 2.2% of permanent modifications have been cancelled so far. Of course, that number will grow. But if these analysts are complaining about these not being shown as a part of the 90+ delinquency bin, then they might not have had much of an effect. Unless these cancellations are highly correlated with the earlier vintages, they would likely have increased the delinquency rates by only few percentage points. It could still be below 10% for most categories shown in the chart.