HAMP Modifications Jump, but So Do Foreclosures

October 5, 2009 No Comments »


Home Affordable Modification Program (HAMP) trial loan modifications more than tripled from June to August, from 66,200 to 202,200, according to the FHFA’s second quarter Foreclosure Prevention Report.

Additionally, 43 percent of loan modifications completed during the second quarter resulted in monthly mortgage payment reductions of 20 percent or more, compared with just eight percent a year earlier.

That’s certainly good news, as we know there is a positive correlation between loan mod performance and monthly payment reduction.

Short sales also increased 45 percent during the quarter to 11,700 as Freddie Mac increased the delegation authority of loan servicers to implement the tricky transactions.

However, mortgage delinquencies continued to rise, driven by unemployment and foreclosure moratoria that keep them in that state of unknown, otherwise known as not current.

Home loans just one month in arrears increased by 11 percent during the second quarter, while loans 60+ days behind jumped 21 percent.

As of June 30, 3.5 percent of GSE loans were at least 60 days late, compared with 4.7 percent of VA loans, 7.8 percent of FHA loans, and eight percent of the industry average.

Meanwhile, foreclosure starts increased 23 percent in the second quarter to 299,200 as 90+ day delinquencies ticked higher.

Completed foreclosures and sales to third parties also increased 38 percent to 57,800 during the quarter, driven by non-owner occupied properties and properties deemed ineligible for HAMP.

Keep in mind that because of HAMP, fewer delinquent borrowers are transitioning to foreclosure because foreclosure sales are temporarily suspended for borrowers requesting HAMP modifications.

However, these borrowers are still considered delinquent, which isn’t exactly a stretch given the horrible re-default rates on modified loans.

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