---

Permanent Modification Conversions Are Higher But Still Not Enough

---

Jan 15^th, 2010

 

According to the Treasury Department, 112,521 borrowers who took part in the 3-month trial modification program have been converted to permanent status. This represents a significant improvement or 3 times more than the 31,382 permanent conversions in December 2009.

 

So far 66,000 borrowers have accepted the offer under the government program Home Affordable Modification Program called HAMP. The program was designed to help 3-4 million troubled homeowners and is scheduled to continue through till 2012.

 

The program was designed to provide incentives for both mortgage lenders and investors to lower mortgage payments for troubled homeowners to affordable levels or 31% of borrowers’ gross income. It has been a tough hurdle to move borrowers forward from the trial phase to the permanent stage.

 

The Treasury Department admits that servicer performance have been poor in the conversion of borrowers from the trial modifications into more permanent ones. The department had urged these servicers in the previous months to perform better and succeed with more loan modifications.

 

According to the Treasury report, there have been 902,620 entries for the trial modification, an increase from 759,058 in December 2009. Through the program, 850,000 borrowers are expected to save an average of $550 in mortgage payments per month. In addition, 1.2 million modification offers have been extended to borrowers by the end of December 2009, an increase from 1 million offers in November 2009.

 

Out of the 902,620 entries registered for the 3-month trial modifications, 75% have started making the required payments since the program’s inception. As for the remaining 25%, few have made incomplete payments while others have not made any required payments at all. 

 

According to the Congressional Oversight Panel for the $700 billion bank bail-out program, roughly 8 million to 13 million foreclosures are expected over the next 5 years. The results achieved today although an improvement from the previous month are still simply not enough.

 

A few of the major banks below made major leaps in converting trial modifications into permanent ones.

 

Bank of America succeeded in getting 206,775 borrowers into the trial phase by the end of December 09, an increase from 158,462 in November 09. It has approved 3,183 permanent modifications by the end of December. This number is only about 2% of the 206,775 borrowers who got passed into the permanent phase. However, it is still a significant increase from 98 borrowers from the previous month of November 09. Bank of America has started sending door-to-door notaries in hopes of speeding up the return of signed documents.

 

Citigroup, a leading performer of the major banks, achieved 4,999 permanent modifications by the end of December 09, up from 271 permanent modifications in the previous month of November. It has also accumulated 119,097 trial modification entries up from 103,478 entries in the previous month of November 09.  

 

Citigroup attributes its success to improvements in document requirements and enhanced borrower awareness.

 

The trial phase of the government loan modification program requires borrowers to complete 3-months of mortgage payments in order to be transitioned into a permanent modification. Borrowers must also provide a hardship affidavit along with other documents.

 

In July of 2009, the Obama administration had demanded a goal of 500,000 modifications by November 2009. A large number of servicers conducted the trial modifications by relying on verbal information provided by borrowers and applicants. When it came to getting the borrowers to turn in information or verification of income including documents, it has been very challenging. In addition, many borrowers complained that they were repeatedly requested for missing forms in which they had already turned in.

 

The top servicers to date responsible for the combined permanent modifications of over 11,000 are Ocwen Financial Corp. and GMAC Mortgage Inc. These companies have converted about 40% of their enrolled borrowers. They have a winning strategy of demanding for most or all of the requested documents prior to allowing borrowers enter the trial phase. Their adopted method helped increase the speed for qualified borrowers and thus enhanced their track record of converting more borrowers into permanent modifications. GMAC has also boosted its loss mitigation staff by an increase of 35%.

 

J.P. Morgan Chase bank had 156,359 active trial modifications by the end of December 09 compared to 143,027 in November 09. By the end of December 09, 7,139 permanent modifications have been converted compared to 4,302 permanent adjustments in the prior month of November 09. Chase recently revealed to Congress in a testimony that 29% of borrowers who entered into the trial modification stage between April and September of 2009 did not complete the required 3-month mortgage payments while 20% had provided all the required documents. Chase bank’s current focus is to obtaining all the required documents from borrowers.

 

Wells Fargo bank reportedly had 126,413 trial modifications by end of December, an increase from 96,137 borrowers from the previous month of Nov 09.  It has converted 8424 permanent fixes by end of December, an increase from 3,537 permanent adjustments in the previous month of November 09. Cara Heiden, co-president of Wells Fargo Home Mortgage said more than 14,000 borrowers had produced all the required documents and should expect a permanent adjustment by January 2010.

 

 

Comments

News Archive

Mark Zandi's Forecast of Housing Prices In 2010 - December 9th 2009

Stay Or Walk Away From Your Home? - November 24th 2009

Fannie Mae Launches New Program Converting Delinquent Homeowners Into Renters - November 11th 2009

Homeowner Gets To Keep Home After Lender Failed To Prove Ownership - October 27th 2009

Implications Of A Loan Modification - October 15th 2009

41 Suspects Arrested For Mortgage Fraud - October 15th 2009

Bridge Loans Coming Soon For Unemployed Homeowners - October 14th 2009

Government Modification Program Inadequate And Calls For An Upgrade - October 9th 2009

Freddie Mac Offers Door To Door Help On Your Modification - September 29th 2009

Federal Housing Administration (FHA) Running Out Of Money - September 18th 2009

Good Time To Refinance With Government Program - September 15th 2009

Selling Your Home And Tips For The First Time Homebuyer - September 14th 2009

How To Keep Your Home If You Lose Your Job - August 28th 2009

Citigroup Performing Well In Foreclosure Prevention - August 25th 2009

Foreclosure Rescue Scams Preying On Homeowners - August 17th 2009

Deutsche Bank Estimates 48% of U.S Homeowners Underwater By 2011 - August 11th 2009

Loan Modification Progress Report Card - August 5th 2009

How Bad Are Foreclosures In Your City? - July 30th 2009

Rep. Barney Frank Threatens Banks To Stop Foreclosure Or Else? - July 28th 2009

U.S Government Wants 500,000 Trial Modifications By Nov 1st - July 28th 2009

Subprime Brokers Involved In Loan Modification Scam - July 21st 2009

'Walk-Away' Survey Shows 26% of Defaults Are Intentional - July 21st 2009

'Own-To-Rent' The New Emerging Mortgage Plan - July 17th 2009

Tools To Help Homeowners Save Big In Property Taxes - July 16th 2009

Lawmakers Dissapointed With Foreclosure Help Programs - July 16th 2009

New Jersey Attorney General Goes After Mortgage Scams - July 15th 2009

Watch Out For Some Misleading Reverse Mortgage Advertisements - July 6th 2009

Chase And Bank of America To Experience 2nd Wave of Foreclosures - July 6th 2009

Obama Extends Mortgage Refinancing Program, Raising New Limit To 125% - July 1st 2009

Paper Avalanche, Lack of Trained Staff Add Obstacles To Loan Modification Program - June 29th 2009

Government Loan Modification And Refinance Program Shows Substantial Progress - June 18th 2009

Luring First Time Homebuyers, Tips To Beat The Competition And Sell Your Home - June 15th 2009

Bank Of America has modified 50,000 loans in Countrywide settlement - May 26th 2009