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Short answer: Not very well.

According to numbers crunched by ProPublica, more than half of the 1,426,833
mortgage mods — 54.3% — have failed.

The table below shows who are the leading mortgage modders are — and its exactly who you would expect. The four largest banks dominate — Bank of America (212,094), JPMorgan Chase, (137,765) Wells Fargo (122,732) and Citi (91,742) — followed by everyone else.

The 4 biggest big banks — despite their economies of scale and allegegded expertise – have a much higher failure rate than the entire group overall. They range from 59-62%, versus 54% for the average — a full 10% worse than the median.

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click for interactive table

Explanation to table:

This Treasury Department data, reflecting activity through November 30, 2010, shows how the largest mortgage servicers participating in the administration’s $75 billion foreclosure prevention program have been performing.

The program features a 3-month trial period for modifications before they’re eligible to become permanent. However, many trials have gone much longer. The “Aged” column shows how many trials have gone longer than six months at each servicer, while the “In Trial” shows trials that have not yet lasted that long.

The “Canceled” column shows how many trials and permanent modifications the servicer has canceled. Here’s how that number breaks down: 729,109 trials have been canceled, 44,972 homeowners have defaulted on the permanent modification, and 590 more have paid off the loan after getting a modification.

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See also:
Loan Mod Program Left Homeowner’s Fate in Hands of Dysfunctional Industry
Olga Pierce and Paul Kiel
ProPublica, Feb. 17, 2011
http://www.propublica.org/article/loan-mod-program-left-homeowners-fate-in-hands-of-dysfunctional-industry

Category: Bailouts, Credit, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

21 Responses to “How is the HAMP Loan Modification Program Doing?”

  1. Petey Wheatstraw says:

    It’s working exactly as was intended when the bank lobby wrote the law.

  2. profoundlogic says:

    I see Litton Loan has a fabulous success rate on modifications. I guess Goldman Sucks was in need of another cash infusion.

  3. jjay says:

    I agree with Petey, HAMP is just another “going through the motions” piece of political theatre.
    Real estate may be headed to 1990 levels to match wages and employment levels that are the new normal.
    If interest rates continue to drift up, the process will accelerate.

  4. KentWillard says:

    Be more precise in your language. Did half of the HAMP completed mods “fail”, or did half of the modification applications never become approved as permanent mods? I don’t care what conclusions people make about HAMP (their conclusions are probably preordained), but it would be nice if we can pretend that the conclusions are based on accurate information.

    Did the mod applications fail because the borrower didn’t make trial payments, didn’t provide the paperwork, or the service bungled it. I think in many cases the borrower couldn’t document their income sufficiently to qualify for HAMP. Which is why many of these loans were stated income loans to begin with. And that is why many HAMP applications became successful mods with the servicer outside of HAMP.

    That said, once a borrower is very delinquent (6+ months), the chances of bringing them back get very low. Back interest and fees become huge. Credit card and other debts build up and put greater pressure strained income. Borrowers’ often either go into denial, move out, or plan their lives around the fact that they will eventually lose their house, and start maximizing their rent free shelter.

  5. Irwin Fletcher says:

    Wrong Petey…This was forced down the throat of the banks, unless you have some proof that the banks wrote the law, then I will have to call bullshit on your statement. (respectfully of course)
    The mortgage companies hated HAMP, and still do, because it won’t work.
    People who take on loans they can’t afford are still in a bad loan they can’t afford. Mods don’t work for the most part. The HAMP program is all politics.
    There is already enough shit to blame the banks with. We don’t have to invent more.

  6. curbyourrisk says:

    Irwin, you can;t possible be that nieve. If the law involves anything financial, it was written by the banksters, with only their “god like” intentions to think about. Please give me a break, EVERYTHING has been to protect banks from day one. I fyou don;t see that, you are truly living under a rock, or you are a banksta yourself. Which is it Irwin???

    We all know HAMP won’t work, we all said it then. BUT, it was designed to continue the extend and pretend and lets just hopes assets melt up.

    I still say, we should claw back all mortgage payments made from 2005-2010 and re-apply them directly to the pricipal payments of existing mortgages. Re-assign everyone new fixed rate 30 year mortgages effective January 1, 2011. I know all about how this would kill the securitization aspects of the loans and hurt the MBS investors. You know what??? I don’t really care about them. You want to keep people in homes???? Do this. You want people to have a higher level of skin in the game? This would immediately flip close to 50% of those under water homes and put them in positive equity. Think everyone would still want to walk away from their homes if there was a chance they could keep it????

    Hard problems needs hard solutions. I just gave you one.

  7. Mike in Nola says:

    Looks like the states are doing whatever they can to provide a pool of buyers with 100% financing who will eventually need something like HAMP.

    http://www.fha-home-loans.com/down_payment_assistance_programs_fha_loans.htm

    http://www.cc-bc.com/state_grants.html

    Just saw an example in trying to sell my parents house in a rural area north of New Orleans. First offer was from a young local government engineer first time buyer. Obviously had no cash. He had arranged 100% financing through some government program. We were asking $150k. He wanted to put $1000 as a deposit. Also wanted to raise the sale price to $155k but we would give him back $5k at the closing and another $10k for “wetlands remediation”. What he could remediate we couldn’t figure out but he wanted to build a workshop.

    Fortunately, we got a $140k cash offer from a well known local real estate investor and made a deal slightly over that. But, it seems that first guy wants to buy something “now that the market has turned up.”

  8. Jim67545 says:

    I doubt the banks had much input here. Most are merely servicing the loan for someone else (MBS) and were loath to add staff to do one-on-one negotiating with mortgagors. It’s easier to send some threatening letters and then just to push it through foreclosure. That’s a clerical thing.

    I find criticism of HAMP equivalent to criticising a no-win situation. If the administration had not induced HAMP, the criticism would be (and was) that the government was letting millions simply be thrown out of their homes by the horrible banks without a chance for negotiating or even communicating with a human being at the servicer. Horror stories abounded.

    So, HAMP was created with everyone involved understanding that for the majority of the home owners, for so many reasons, they would fail to perform. Now folks are looking at HAMP and saying that only half (or whatever) of the homeowners’ modifications succeed. It’s a damned if you don’t, damned if you do situation and, frankly, cheaply obtained criticism.

    I submit we should applaud the fact that the government caused the lenders to treat their customers as human beings, that any succeeded at all and that those households who succeeded have avoided the disruption that foreclosure would have caused them.

  9. louis says:

    Sorry Irwin gotta call bullshit on your bullshit call. This is not as complex as your financial class make it out to be. There are some very intelligent ideas on how to fix the problem and redo these loans. There is a group of people with an enormous amount of power who are preventing it from happening.

  10. beaufou says:

    HAMP isn’t designed to help homeowners, it is designed to protect the banks from having to take serious write downs.
    Like everything else these days, a short sighted solution that will prolong the crisis.
    You would think that homeowners deleveraging and the housing market stabilizing would be a good perspective for the long term but we live in an immediate cashing-in world dominated by a class of people bent on destroying everything in their greedy paths.
    As for not blaming banks, well yes, Bank of America are advising people seeking a mod to default on their mortgages and a few unsuccessful mod-filings later; BoA somehow has a knack for misplacing or losing paperwork; foreclose. Foreclosure proceedings never stop while people are still promised or given a temporary modification.

  11. bulfinch says:

    I still say, we should claw back all mortgage payments made from 2005-2010 and re-apply them directly to the pricipal payments of existing mortgages. Re-assign everyone new fixed rate 30 year mortgages effective January 1, 2011.

    I think skin-in-the-game, I think personal sacrifice and savings, not moving the decimal around to make people suddenly feel wealthy. Maybe your heart’s in the right place, but what you’re proposing is merely a different form of larceny clad as populism. If it sucks less, it is only barely.

    I don’t see why it has to be a choice between having bailed out the banks or bailing out greedy speculators, naive investors and the serial HELOC abuser. Both are odious. A better program might have been one in which the government acted as guarantor in a lease agreement for the defaulting underwater homeowner, allowing them to easily qualify for a lease while they repaired their credit rating.

    As for the banks…

  12. bulfinch says:

    Apologies: that first paragraph should have had an attribution to Curbyourrisk.

  13. obsvr-1 says:

    Only the gov’t can define a program where permanent modification is really temporary, as the HAMP modifications reset after 5 years (*see below). Hoping that the market will recover for yet another refi, because after all, housing prices always go up.

    Perhaps the program should really be named HEMP, House Eventually My Property (where My = Bank); but it will make you feel better while smoking the it.

    * HAMP In Action

    When a lender reviews a file for HAMP, they first look at the borrower’s monthly gross income. To achieve the target amount (TA) they multiply income by 31%. The result is the amount available for all monthly mortgage related expenses. The lender then subtracts monthly property tax, insurance and association dues to get the target monthly mortgage payment.

    From there, the lender identifies a qualifying rate, term, and payment using the Standard Waterfall approach.

    1. The first step is to capitalize payments in arrears, interest or escrow advances. This figure is added to the loan balance to obtain a new starting loan balance.
    2. Next the lender reduces the current interest rate in .125% increments until the target 31% monthly mortgage payment is reached. As mentioned above, the interest rate may not be reduced to less than 2%.
    3. If reducing the interest rate does not get the loan to the in a 31% monthly mortgage payment, the next term is to adjust the term to up to 480 months (40 years).

    A Note About Principal Reductions: Lenders are not currently required to reduce the principal loan balance under HAMP. To-date the majority of servicers have chosen not to reduce principal balances to make a HAMP loan modification possible. HAMP guidelines do state that servicers may forgive principal to achieve the 31% target payment.

    A Note about Interest Rate Cap (“IRC”): HAMP dictates that the modified interest rate remain in place for 5 years. After that period of time, the interest rate will increase by 1% per year (or a lesser amount as may be needed) until it reaches the IRC.

    What is the IRC

    The IRC for a modified loan is the lesser of the fully indexed and fully amortizing original contract rate, OR the Freddie Mac Primary Mortgage Market Survey rate for 30-year fixed rate conforming mortgage loans, rounded to the nearest 0.125%, as of the date that the modification document is prepared.

    If the modified rate exceeds the Freddie Mac Primary Mortgage Market Survey rate in effect on the date the modification document is prepared, the modified rate will be the new note rate for the remaining loan term.

  14. roxy says:

    The Banks had a great deal to do with HAMP. One of the key components of the program was going to be giving the bankruptcy courts the power to write down 1st mortgages to the value of the collateral as they now do on car loans and other loans. The banks fought this tooth and nail and won. Without that negotiation leverage homeowners did not stand a chance with HAMP.

  15. Francois says:

    Irwin:

    The Geithner’s pledge is an incantation he has been indoctrinated to repeat, like a mantra:

    I pledge allegiance to the Banks of the United Serfs of America and to the Plutocracy for which it stands. One Corpor-nation, under the Almighty Buck, too big to be divisible, with lobbyists, Supreme Court Justices, bought-out media, deregulation, no safety nets or unions, extreme economic disparity, bailouts for rich crooks, a massive defense budget and military-industrial complex, and falsely pretexted war profiteering, paid for by all of those with little means. (To be solemnly sworn while placing hand over wallet).

  16. rfullem says:

    Why is it that everyone that is not a bank is a “speculator?” I bought first house house in March 2007 for kids, 50% down (CASH savings), 30-year fixed rate. Salary seriously cut in 2008. Yet somehow, I fall in that “irresponsible” or “speculator (Obama’s words)” camp? That is the kind of BS that comes from aholes who bought a house 20-years ago and partied all the way to the bank while sucking in HUGE taxpayer subsidies all along the way (mortgage deducs, Fannie subsidy, refis, etc). If I buy a house next time I will skip the home inspection and check the subprime exposure at Wells.

    On HAMP, I can safely say that it was joke and a scam. The banks had no interest in making the program work and committed no resources. I applied. they did not have form so you had to cobble together Got 15 “final” rejection letters (DENIED FOR TOO MUCH EQUITY IN HOUSE – what?) – 11 on one day.

    On the numbers, the program was backwards. Modify the least likely to repay. One note. I am guessing that a decent portion of the mods were simply loans that were so bad that even 0% int. rate would not work. So how were these loans underwritten in the first place? loan to own and that is illegal.

  17. Convexity123 says:

    As somebody who works for a major mortgage servicer and does mortgage mods every day and chats with distressed borrowers, I can safely say that most – not all – of the folks who received HMP (or HAMP) modifications are deadbeats … based on my experience. The only people who have been cheated in this country are those who have paid their mortgage on time. Sorry. Sometimes the truth hurts. HMP is just a program to move money from those who have been financially responsible to those who have not. But nobody said life was fair …

  18. Jon V says:

    Five have canceled rates below 30% and permanent rates above 50% (all of them have started mods well below 100,000). Other smaller outfits do not appear to be any more successful than the large firms. I wonder if anyone would hazard an opinion on why there should be such wide differences.

  19. randy says:

    I’m unemployed. I applied for a HAMP modification through Wells Fargo. They made me do lots of paperwork and strung me along for about 2 months. Then they denied my application on the grounds that they found a rule that forbid them from considering unemployment benefits as income. I asked for a copy of that rule and they stonewalled me. Then the guy who had worked my case disappeared.

    I’ve got enough other things to do that I haven’t found time to go cause a stink.

    As long as the bankers write their checks to the legislators the people will get shafted.

  20. courtney416 says:

    I am in Hamp right now , The reason was I went into the hospital on 8/11/2009 ,liver failure, was in for 8 1/2 mths, i was not in mind or body didn’t know a thing till feb 2010, mean time husband could not keep up mortgage and taxes tried to keep up everything else and possibly plan a funerial for me after 40 yrs of marriage, i came home to this mess in end of april 2010, he lost his job july 2010, we are inforclosure but working with hamp, I am so confussed cause our bank is the one originally forclosed on us, but gave me hamps number which workes with the bank, and the lawyer for them just sent us papers for upcoming court dates. never late on a payment before and no one is getting back to us.sending copies so have proof of my contact with them and i understand they dont use unemployment as a income. wouldn’t you figure this is a no brainner on hamps part, and dont you consider this a hardship?

  21. Cobalt says:

    Fha hamp is a waist of time for a majority of home owners that need the real help. I went into a forbearance plan that I needed to be looked at for an FHA-Hamp Modification bottom line I was working with Citi and was told that Citi was trying to get as many people modified as possible (yeah right) any way FHA- Hamp will not extend the loan to a 40year and they don’t do the 2% graduated interest rate. I myself have a 4.875% interest rate which is pretty good. Now heres my reason for attempting a Modification I live in California which has been hit pretty good with all the recession and cut backs. I thought it would be a no brainer since I work at a City College my classified position has to take 15 furlough dayswhich equals 1 month of pay and I also teach some short training classes. I use to run 5 classes per semester in the fall and the spring and also 3 in the summer now I teach 2 in the fall and 2 in the spring so a loss of 9 classes so imagine for quick numbers I’m out about 4 to 5 thousand dollars a year easily. So what else do I have to do It ssems like people that have forclosure notices get the pat on the back and get a better chance at any forgiveness. Fha-Hamp needs to be looked at because the only qualifications you will get is a interest rate at Fha’s going rate want a real laugh my Modification save me 3 dollars and added 1.5 years to my loan so yes this is mostly politics and something that sounds good it wasn’t ever made for the responsible home owners that came into hard times due to cuts in salary and furloughs and legitimate reasons. last thing Citi knew my loan was Fha why didn’t they just give me the truth that my rate was as low as it will go and yes I have called FHA and the said there is no graduated interest rate so if the US goverment call this help I would like to see them really help the other 800,000 or so home owners have an affordable mortgage you see above that I have an actual hardship and legitimate