Last month was the slowest this year in terms of permanent loan modifications being started – at the same time, the number of trial modification cancellations surged to 616,839, greatly outnumbering the 421,804 active permanent modifications.
The most common causes of cancellation have been insufficient documentation, trial plan payment default, and ineligible borrowers, those with debt-to-income ratios (DTI) already lower than 31 percent.
Since the program began, 12,912 permanent mods have also been canceled.
“As a result of the requirement that servicers verify borrower eligibility through documentation prior to initiating trials on or after June 1, cancellation activity for new trials is expected to gradually decline,” the report said.
“However, the number of new cancellations is expected to exceed the number of new permanent modifications for the next few months as servicers clear their backlog of aged trials.”
The good news is that the median savings for borrowers in permanent mods is $513.09, or 36 percent of the median mortgage payment before modification.
The bad news is the median back-end DTI ratio (total monthly debt obligations) for borrowers post-mod is still super high at 63.5 percent.
Of those who received a permanent mod, 29.3 percent have received some type of principal forbearance, 56.8 percent have had their term extended, and all 100 percent snagged a mortgage rate reduction.
Bank of America, the top loan servicer in the United States, has completed the most permanent mods with 76,330 through July, followed by Chase’s 58,489 and Wells Fargo’s 46,732.
The Charlotte-based bank and mortgage lender also has the most active trial modifications at 84,741, followed by Chase with 37,586 and Wells Fargo with 22,338.