HAMP = FAIL: 32% Success Rate is Good Only in Baseball

Today the Treasury released the February 2010 Making Home Affordable (aka HAMP) Servicer Performance Report, which depicts very informative statistics on the success of the program to date.  I decided to do a little digging, since the academic quarter at UCLA ended today and I had a bit of free time…

If you look at page 4 of the report, you will see that we have reached a cumulative total of 1,094,064  trial modifications through the end of February 2010.  The success of this program, however, is dependent largely on the percentage of trial modifications which are converted to permanent modifications, a step which requires 90 days of solid borrower performance under the new modified terms.  Thus, we need to evaluate those trial modifications which are at least 90 days old, taking us back to November 2009.  At that time, there were  822,075 trial modifications.  Of those, 32%  have achieved permanent status.  I did a little math to get the breakdown: 168,708 (20.5%) are “permanent modifications” and 91,843 (11.2%) are “pending permanent modifications.” 

That’s great, so what about the remaining 68%?  I bet it’s safe to say that this is the redefault rate.  A bit of fishing may help out.  Hmmm…on page 6, they tell us that a WHOPPING 54% of modifications were made due to loss of borrower income!  So what difference does it make whether the interest rate is 7% or 2%?  Out of work borrowers still can’t make the payments, and this is the fundamental drag on today’s housing market.  No window dressing can ever hide the fact that incomes are the only real cure for an ailing housing market.  Link below: 



Shadow Housing Inventory – Delaying the Inevitable

James Hagerty of the WSJ writes that more waves of foreclosures will keep downward pressure on house prices for years to come.  Hagerty cites a recent study that estimates, nationwide, approximately 5 million out of an estimated 7.7 million delinquent borrowers will eventually lose their homes through foreclosures or related procedures.  And 5 million homes would represent roughly 10 months of inventory at the current pace of home sales.  Unless we see some highly unlikely turnaround in the labor markets, the government’s efforts to reduce foreclosures will be largely futile.  Then again, I was one of those kids who preferred to yank out a loose tooth using a string and doorknob, rather than alter my life for days on end until the inevitable came to pass.



Foreclosures Drop, But Logjam Ahead

RealtyTrac reports a 10% decline in foreclosures for January, compared to the previous month, yet the number is 15% higher than January 2009.  “January foreclosure numbers are exhibiting a pattern very similar to a  year ago: a double-digit percentage jump in December foreclosure activity  followed by a 10 percent drop in January,” said James J. Saccacio, chief  executive officer of RealtyTrac  “If  history repeats itself we will see a surge in the numbers over the next few  months as lenders foreclose on delinquent loans where neither the existing loan  modification programs or the new short sale and deed-in-lieu of foreclosure  alternatives works.”

And while the well-intentioned Home Affordable Modification Program (HAMP) has targeted over 3 million borrowers, only 900,000 trial modifications have been extended, with only 66,000 of those having been made permanent.  At a success rate of 7%, it’s tough to predict anything but a foreclosure log jam ahead…