Very Hamp-ered

Posted by Tracy Alloway on Dec 11 12:40.

They are here!
Official figures for the number of permanent modifications undertaken as part of the US Treasury’s Home Affordable Modification Plan (Hamp) were published on Thursday.
As a reminder, the Hamp is aimed at keeping US homeowners in their houses by reaching an agreement between the relevant banks and mortgage servicers to lower interest payments. Homeowners agree to enter a three-month trial period based on the lower interest, which then hopefully gets converted to a permanent modification once they successfully make the payments and submit additional paperwork.
Only the conversion rate into permanent mods has been an issue with the programme for some time.
Without further ado then, here are the numbers, via HousingWire since the link to the official US Treasury report seems to be broken:
Of the 1m homeowners who have been offered three-month trial modification under the Home Affordable Modification Program (HAMP), 31,382 have received a permanent modification, according to a report from the US Treasury Department.
That’s a conversion rate of 3.1 per cent — not exactly a ringing success.
And while mortgage servicers and borrowers like to blame each other for the slow conversion rate into permanent mods, the US Treasury is taking the more populist route, and laying the blame squarely at the feet of the servicers, if the Department’s press release is anything to go by:However, the report shows that servicers have only converted 31,382 modifications to the permanent phase. According to servicer reports, most borrowers in modifications are meeting their responsibilities to make their payments. Servicers need to do their part to help borrowers complete the process and get to the finish line. Top Administration officials met with servicers in Washington DC this week to urge a faster pace in converting borrowers to permanent modifications.
The actual reasons for Hamp’s slowness are rather more complex, but suffice to say unless there is a wave of trial mods converted to permanent status very soon (about 375,000 mods are scheduled to become permanent by the end of the year) the programme will increasingly look like a failure.
Even more politically damaging are stats like the below, from the Washington Independent, suggesting the Hamp might actually be slowing down mortgage mods:Private lenders were completing 120,000 permanent loan modifications per month during the first quarter of this year. Under the Obama administration’s initiative, some 650,000 homeowners have entered into trial loan modifications, but only about 10,000 permanent loan modifications had been completed by the end of October, a Congressional oversight panel reported on Wednesday. Treasury Department figures released Thursday showed that only 31,382 permanent loan modifications had been completed under the government program as of Nov. 30.
All of which might lend fresh impetus for the Treasury to try its hand at reforming Hamp, or replacing it with a programme aimed at principal forgiveness, rather than just forbearance. The alternative is to simply ratchet up the pressure on banks and servicers to convert more permanent mods under the same old Hamp.
And that hasn’t worked out so well. So far.

Related links:FT Alphaville’s coverage of HampHamp questions – Calculated Risk


Related links:
The return of yield? – FT Alphaville
Treasury Yield Curve Steepest Since at Least 1980 After Auction – Bloomberg