HAMP Conversions Up. Largest Payment Cuts Yield Best Results

by devteam May 10th, 2011 | Share

The April edition of the Housing Scorecard has been issued byrn Treasury and the Department of Housing and Urban Development (HUD). It showed “continued mixed signals and some signs of weakness in thernmarket – despite growing evidence of progress in the broader economy,”rnaccording to Assistant HUD Secretary Raphael Bostic.  </p

The Obama Administration’s monthly housing scorecard recaps data from a number ofrnreports issued earlier by both public and private sources such as the U.S. Census,rnS&P Case/Shiller, RealtyTrac, and the Mortgage Bankers Association.  Most of the new information in the scorecardrnrelates to the Making Home Affordable Modification Program (HAMP). </p

The HAMP program, which is under attack byrnCongress and threat of defunding, seems to have finally hit its stride.  36,000 trial modifications were converted tornpermanent status in March, the largest number since the program began in Aprilrn2009.  A total of 670,000 loans have beenrnpermanently modified during this period. rn22,000 homeowners began trial modification periods since the last HAMPrnreport bringing the total to 1.56 million. rnTrial modifications have been cancelled for 751,500 loans since thernprogram began and 137,363 homeowners remain in trial status.</p

“Thernnumbers of homeowners both entering HAMP and converting from trial to permanentrnmodifications each month are a powerful reminder of the role this program isrnplaying in delivering much-needed assistance to families facing a housingrnmarket that is still very tough,” said Acting Assistant Secretary for FinancialrnStability Tim Massad. “And by providing modifications that are sustainable forrnhomeowners over time, HAMP is setting standards for the industry thatrnultimately mean more options for more families to avoid foreclosure.”</p

Thernmodifications are increasingly successful. rnPermanent modifications began in earnest in Q3 2009 so those and thernmodifications made in the next two quarters have now aged past the one yearrnmark with an average serious delinquency rate (90+ days) of 15.9 percent. Therernwas a better than 4 percentage point improvement between loans made in thernearliest of those three quarters and those made in the latest.  Loans that are in earlier stages of maturityrnappear to be performing substantially better yet.</p

Therngreater the reduction in monthly payments achieved through modification thernmore successful that modification is turning out to be.  Among the older vintage modifications, thosernthat received less than a 20 percent payment reduction are running a 26 percentrnserious delinquency rate after one year while those with at 30-40 percentrnreduction have a rate of 16.1 percent and those with a reduction in excess ofrn50 percent have a rate of 8.8 percent. rnThis pattern is consistent at 3, 6, and 9 month benchmarks and across allrnvintages of modification. </p

Recapping previously released data…</p

Home prices remained weak under continued strainrnfrom foreclosures and distressed homes but delinquency rates maintainedrna downward trend compared to early 2010 and foreclosure starts and completionsrnremain below peak. Part of the improving foreclosure picture is a result ofrnon-going internal reviews of procedures related to foreclosure processing, arnshort-term situation. Plus banks are employing strategies aimed at reducing the home price impact brought on by sudden spikes in local foreclosure inventory.</p

With house prices still dropping in somernareas, aggregate home equity was down fractionally in the first quarter and nowrnhovers slightly above $6 trillion.  Thisrnis slightly above the record low point reached in the first quarter of 2009 butrnis less than half the homeowner equity that existed early in 2006.   </p

The low prices coupled with continued record low interestrnrates make houses extremely affordable. rnThe National Association of Realtors® (NAR) Housing Affordability Indexrnis 187.8 where a score of 100 indicates that a family with a median income hasrnexactly enough income to qualify for a mortgage on a median priced home.</p

Sales of existing homes were up about 50,000 from thernprevious month and the inventory of existing homes for sale dropped from 8.5rnmonths supply to 8.4 months.  Therninventory of new homes also dropped from 8.2 months to 7.3 months but thernnumber of vacant homes held off of the market increased from 3.6 million torn3.86 million. </p


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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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