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: 

http://www.makinghomeaffordable.gov/docs/Feb%20Report%20031210.pdf