Negative equity is expected to drive re-defaults higher on loans modified under the Home Affordable Modification Program, according to one ratings agency. Despite the grim outlook, however, trial payments plans under the program recently tripled. In other HAMP activity, Freddie Mac has made changes to its guidelines and forms.
In a report last month, Moody’s Investors Service said that uncertainty about implementation and capacity restraints have resulted in “tepid” benefits for servicers participating in the HAMP. The ratings agency, however, expects the program to take off once implementation issues are resolved.
“But a high percentage of these loans will ultimately re-default given the estimate that nearly 30 percent of homeowners in the U.S. have negative equity, with nearly one in four having negative equity that exceeds 10 percent,” Moody’s stated. “Recidivism rates may also increase as the moral inhibition to default decreases when ‘everyone else’ is also defaulting on their mortgage loans.”
The U.S. Department of the Treasury said HAMP is designed to help as many as 4 million borrowers by the end of 2012. The number of HAMP servicers stood at 57 as of last month. The program covers more than 85 percent of all U.S. mortgages. Over 360,000 trial modifications were underway as of Sept. 9, while 570,000 trials had been offered.
Trial payment plans started under the HAMP more than tripled from 66,200 in June to 202,200 in August, the Federal Housing Finance Agency reported last week. Completed loan modifications, however, fell 13 percent from the first quarter to 32,300 in the second quarter as HAMP trials replaced traditional modifications and repayment plans in process.
FHFA said more than half of second-quarter modifications resulted in a 20 percent or more payment reduction.
In Bulletin Number 2009-23, Freddie Mac said it is requiring servicers to evaluate and process HAMPs in its Workout Prospector. The technology has been updated for HAMP. The bulletin also indicated that first mortgage servicer requirements were updated based on the recently announced Making Home Affordable Second Lien Modification Program.
Additionally, revisions have been made to the HAMP Modification Agreement, Trial Period Plan and Hardship Affidavit, the bulletin said. Freddie directed servicers to HAMP Frequently Asked Questions at www.HMPAdmin.com/portal/index.
Freddie announced last week that it hired Titanium Solutions Inc. to meet with HAMP prospects at their homes if they haven’t responded to earlier contact attempts. Titanium will help delinquent borrowers supply missing information and documents as well as complete other requirements needed to begin the HAMP three-month trial periods.
Titanium won’t, however, accept any payments from borrowers. But it will have special information about the borrowers’ loans. These moves are designed to deter imposters.
HAMP trial and completed modifications at Wells Fargo & Co. were 33,172 during August, 64 percent above the prior month, a Sept. 9 news release said.
CitiMortgage reported that a decline in completed modifications was offset by a 29 percent increase in overall loss mitigation actions due, in part, to the implementation of trial modifications under the HAMP.
An online HAMP eligibility tool for borrowers has been created by Quicken Loans Inc., a Sept. 25 statement said. The three-step process addresses specific situations.
In a news release last month, Financial Industry Computer Systems Inc. said its Mortgage Servicer meets HAMP requirements. The servicing software provider is targeting the 2,300 HAMP servicers.
In addition to new tracking and reporting capabilities, FICS said it has added features for the capitalization of delinquent payments and other amounts owed. In addition, programs, various statements and reports have been modified to accommodate the principal forbearance amount.
A new solution announced in September by SoundBite Communications Inc. helps HAMP servicers accelerate the number of trial modifications they start. SoundBite said the service improves borrower communication throughout the modification process and helps gather up needed documentation from the borrower.
SoundBite, a MortgageDaily.com advertiser, is holding a HAMP Webinar on Oct. 8.
The Center for Public Integrity recently criticized the government for paying 21 HAMP servicers billions of dollars even though they were heavily involved in the subprime lending industry. These firms “fed off the subprime lending frenzy that devastated the banking system.” Subsidiaries of three of the biggest U.S. lenders — Wells Fargo, Bank of America Corp. and JPMorgan Chase & Co. — were listed at the top of the group’s list.
