HAMP and Foreclosure News

There are now new HAMP metrics available for lender compliance. The report uses a new dashboard that has timetables for the full implementation of the HAFA (home affordable foreclosure alternative) and also the 2MP (2nd lien modification program).

The metrics allow officials to monitor homeowner experiences and include statistics on the time taken to answer incoming calls, how long it takes to resolve any complaints and what the outcome was for any homeowners that were not eligible for a modification or were unable to convert to a permanent modification.

This is important for a number of reasons, many applicants have been complaining of poor service through the modification program, of unresolved complaints, lost paperwork etc. Hopefully by monitoring the servicers performance officials will be able to take necessary steps to improve the general administration of the Home Affordable Modification Program service.

The number of cancellations of applications to the program are still way to high, the main reasons being that homeowners who were offered temporary modifications were either not able to verify their income, or failed to meet the payments during the trial period. Changes in the administration have now been implemented whereby a temporary modification is now no longer offered before eligibility is demonstrated including proof of income.

The good news is that around 50% of the homeowners that were not offered a permanent modification through HAMP were either offered a proprietary modification or were able to catch up on repayments bringing their loans current. Less than 2% have gone to foreclosure and less than 10% entered the foreclosure process.

So it would seem, from these reports, that making an application for a modification through HAMP, even when not being offered a permanent modification, can still for many result in a favorable outcome i.e. foreclosure is avoided.

The recovery overall is still fragile but there are some signs suggesting that recovery will take place over time, but probably not until the glut of homes on the market is cleared and the demand and supply equation goes back to a more balanced level.

Extracts from the Scorecard  for July 2010

• Interest rates remain at all time lows (for 30year fixed mortgages) promoting affordability, 7.2 million homeowners have refinanced since April 2009 which equates to around $12.9 billion in total borrower savings
• More than twice as many homeowners helped to refinance or restructure their mortgages i.e. nearly 3 million versus 1.24 million foreclosure completions since April 2009
• The impact of HUD’s Neighborhood Stabilization Program is now being tracked
• Number of trial agreements converted to permanent modifications in June 2010 was 51,000
• Number of HAMP permanent modifications awarded since April 2009 is 416,400 ( to June 2010)

You can access the full June and July scorecards here on the  HUD Scorecard page.

So first of all, what does HAMP mean to anyone facing foreclosure when their lender has decided to participate in the Home Affordable Modification Program.

Any mortgage provider who participates in the Home Affordable Modification Program cannot refer a loan for a foreclosure sale, or take action on a foreclosure sale for loans that are eligible for the program until the mortgage holder/homeowner has been evaluated for HAMP, and if the homeowner is eligible a trial modification offer has been made.

So once a mortgage servicer participates in the HAMP program they are obliged to make reasonable efforts to get in touch with any homeowners entering the foreclosure stage i.e. the stage where they would previously have been progressed to foreclosure, to find out if they are eligible for the program. This could include personal contact with a homeowner, but that is at the discretion of the lender and is more likely to be in the form of a letter.

So the good news is that while under consideration or during the trial period, you cannot be progressed to foreclosure. Also once in the trial period and after making the first trial period payment, the lender cannot take the first legal action to initiate a new foreclosure. Of course if you fail to make the trial period payments, you will not be offered a permanent modification and you will be back to square one where foreclosure may be progressed.

Secondly with respect to unemployment, if you find yourself unemployed you can ask participating lenders to consider you for a new Home Affordable Unemployment Program referred to as ‘UP’.

If you were already into a trial period with HAMP and lost your job, you can ask to be considered for ‘UP’ only if you entered the trial period before missing 3 full consecutive payments.

It’s also worth checking now if you are eligible for ‘UP’ where you were previously not eligible for ‘HAMP’ because the eligibility criteria is different. In other words if you are unemployed, you may not be eligible for ‘HAMP’ but you may be eligible for ‘UP’ otherwise known as the Home Affordable Unemployment Program.

If all else has failed and foreclosure is looking unavoidable there is another extension to the Make Home Affordable program called Home Affordable Foreclosure Alternatives (HAFA), which provides 2 options to foreclosure. These are a ‘Short Sale’ option or a ‘Deed in Lieu of Foreclosure’ option. Both of which you can find out more about via the link.

There are some rule changes that new applicants should be aware of which actually come into effect on June 1st. Servicers now require upfront documentation before they can initiate new trial modifications and in practice that means they have been making that request since March 2010. The treasury is monitoring service performance to ensure the borrower demand is met and that modification requests are reviewed in a timely manner. This contradicts most reports from real people on this aspect of the HAMP service where the biggest complaints have been of slow responses and lost paperwork.

Servicers are stating that the most common causes of cancellations include missed trial payments and incomplete or unverifiable documentation. So you can see that getting the documentation in up front for verification should improve the efficiency of the service and ensure eligibility before the process is initiated. As for missed payments, well that is why this criteria was introduced, people have to demonstrate that they can meet the new payments before a permanent loan modification is offered.

There are statistics now available that show servicers who started trials with verified documents generally posted higher conversion rates. This is as opposed to accepting stated incomes, i.e. those that relied on the borrower to disclose their income and didn’t verify the accuracy of those statements before starting the process of loan modification. The figures for the 4 largest servicers using stated income as a basis for trial starts is a less than 30% conversion rate.

This certainly begs the question of whether people may have been overstating their income to try and get on the program, because if they have then it looks like that has seriously back fired on them, to the tune of 70% of applicants in the case of the big 4.

As an aside, it is probably worth knowing that the HARP Home Affordable Refinance Program is due to end on the 30th June 2011, so if you were considering looking into this as an option you are probably going to have to make a move on it pretty soon.

For the full report on the HAMP latest news you can use this link.

The press release states that in January the number of permanent modifications nearly doubled over the previous month and that over one million trial modifications have started from a total of around 1.3 million that have been offered. Once the trial period is passed the loan modifications are then converted to a permanent arrangement so the number of permanent modifications is set to rise significantly, assuming people get through the trial period.

So, based on this information, the news coming from the Home Ownership Preservation Office is that the Home Affordable Modification Program (HAMP) is doing its job. Struggling families are getting the help they need, they are paying less each month for their mortgages and there are signs that the housing market is beginning to stabilize.

Of course HAMP is just one part of the stimulus package and it was further stated that with all the other initiatives being progressed i.e. support for lower mortgage rates, access to credit, tax credits for home buyers and so on, that more than 4 million have refinanced their home mortgages to more affordable levels. They also state that interest rates are at a record low and that home prices and home sales are on the rise again in an economy that is growing.

More than 940,000 home owners are said to have been helped by the Home Affordable Modification Program, although the average saving is now said to be around $500 per month, a little less than the previously quoted $550 average; but still pretty impressive all the same. As is the quoted figure of an aggregate saving of $2.2 billion. The overall program goal is said to be help for 3-4 million home owners and is considered to be on target given its finishing date of 31st Dec 2012.

Another point worth noting is that the required documentation for the (HAMP) has been streamlined making the process for applying a little easier. Also with more mortgage providers subscribing to the program it is stated approximately 89% of eligible mortgage debt outstanding is covered by the HAMP participating providers.

The other significant  part of the Make Home Affordable Progam is the Home Affordable Refinancing Program (HARP), however anyone thinking of applying for this program needs to be aware that it finishes in June of this year (2010).

You can get a copy of the full  Making Home Affordable Program report in .pdf format via this link.

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