2010: Better Results, But HAMP Still Short

New York-Market insiders expect combined government-private foreclosure prevention efforts so far to bring better results by midyear 2010.

Many mortgage servicing veterans agree that while the loan modification success ratio may further increase thanks to continuous efforts to improve the Home Affordable Modification Program, and other government-sponsored initiatives, it will be very difficult to reach the stated goal of saving anywhere from 4 million to 5 million homes this coming year. Data showing the number of foreclosures continues to rise, with 3 million new foreclosure starts reported in 2009 alone, indicate defaults will further undermine an economic recovery going forward.

"It is difficult to reach the numbers the administration thinks, even though servicers are doing everything in their power to reach those distressed borrowers," said John Anderson, senior managing director of Quantum Special Services. "The housing market could be bottoming out by the end of next year. So if we go on the assumption that it's going to be stable, that unemployment remains at the current level, at least by now we know what volume of loans we are dealing with."

In fact industry data such as Clear Capital Home Data Index Market Report based on Oct. 29, 2008 to Nov. 27, 2009 data show the national quarterly home prices continued to gain modestly at 1.4%, so "even with a potential increase in REO saturation rates, many national and regional markets are showing strong evidence of stabilizing."

Data also showed that by December, 1.6 million loans that were current in March 2009, were 60 days delinquent.

Everyone's fear is that more foreclosures continue to deteriorate the quality of housing assets. And while HAMP and TARP brought the problem into the spotlight and created hope, servicers still remain ill-equipped to handle the volume at hand.

One loophole that has tampered servicers' success in implementing HAMP is its voluntary nature. Center for Responsible Lending president Michael Calhoun stressed in a recent statement that Obama administration adjustments to HAMP "do little but highlight the continued failure of lenders' voluntary efforts to stop the foreclosure crisis." The record shows lenders have made too few long-term modifications, he added, noting that without mandatory requirements and fully disclosed results, foreclosure prevention efforts will not succeed.

HAMP processing requirements have evolved, said Lee Howlett of ISGN, who during his over 30 years in the mortgage marketplace has covered all aspects of origination and servicing.

In his view HAMP still is a work in progress that may bring maturity by midyear. "It is still tending to the bubble that is moving through the snake" until all its processes and procedures are fully shaped. He sees "some normalcy" by the end of next year if combined with better employment. It is getting easier to proceed with the task of curbing foreclosures as HAMP and non-HAMP loan modification processes improve, he said. But as they do their day job, Mr. Howlett said, there is not much time left for what he calls a servicer's night job, that of looking forward.

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