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Active Modifications Improve Levels of Asset Preservation

Together, government and proprietary loan modifications, the biggest asset preservation action taken in the U.S. history, are mapping a speedier and more effective prospect for loans in need of a workout.

Hope Now reported that "unprecedented outreach efforts" have resulted in over 172,000 completed loan modifications in April, a 46% increase in loan modifications compared to April 2009.

The Home Affordable Modification Program combined with proprietary loan modification data reported by mortgage servicers tabulated by the U.S. Treasury show the industry completed almost 642,000 permanent loan modifications for at-risk homeowners so far in 2010.

In a recent statement, Hope Now senior advisor Faith Schwartz stressed that data "continues to show that the industry's comprehensive loan modification efforts are making significant headway" bringing the total number of modifications, including HAMP, to over three million since 2007.

"Our work is far from over," she said. To keep as many homeowners as possible in their homes through loan modifications Hope Now members also offer payment reductions, forbearance and repayment plans, or work "to find liquidation alternatives for borrowers seeking a graceful exit to homeownership."

Furthermore, the private sector alliance of mortgage servicers, investors, mortgage insurers and nonprofit counselors said its April 2010 data continue to show an increase in the total number of loan modifications offered to at-risk homeowners.

Other industry data show low redefault rates on previous modifications indicating there is hope these modifications are sustainable in the long term.

For example, Barclays Capital analysts noted in a recent Mortgage Credit Tracker report that redefault data for modifications completed during the second half of 2009 continue to look encouraging since six months later bout 30% of loans modified in 3Q09 relapsed into delinquency, compared to 50% for loans modified by the end of 2008.

The report suggests the trial period imposed on HAMP modified loans could be one reason that helped "by weeding out early defaulters" who did not get a permanent modification. Also, payment reductions on modified loans have increased over time "contributing to lower debt-to-income ratios and better redefault performance."

Analysts note that "a temporary increase" in defaults driven by faster REO liquidations and short sales, shows "modifications will remain a drag on default rates as servicers begin to implement the new HAMP waterfall."

From the micro market perspective, during this intensive loan modfication process Hope Now said servicers are trying to not lose sight of the fact that even though the number of HAMP modifications continues to increase, homeowners who are not eligible for HAMP need to rely on sustainable proprietary modifications. Hence, these types of modifications "continue to play an important role."

Similarly, tools such as the Hope LoanPort Web-based housing counselor tool developed by the Hope Now alliance to streamline the submission of completed loan modification applications "continues to pick up momentum as well." The Web portal currently has 10 major mortgage servicers on board and over 200 housing counseling agencies nationwide.

Bank of America, the nation's largest mortgage servicer, is one of the most recent additions to the portal partners working with Hope Now affiliated nonprofit housing counselors. It also means one in every five mortgages in the country "is now poised to offer loan modification solutions" through the portal, the alliance said.

Hope LoanPort CEO Larry Gilmore called the addition "a significant development in the evolution of Hope LoanPort, with far-reaching implications," since including B of A two of the three largest mortgage servicers in the country are now using the webportal. In addition, he said, including B of A these 11 mortgage industry partners "represent the majority of loans serviced throughout the United States."

B of A joined American Home Mortgage Servicing, Bayview Loan Servicing, Chase, Citi, GMAC, Ocwen Loan Servicing, OneWest, PNC Mortgage, Saxon Mortgage Services and SunTrust Mortgage, which make up the list of top servicers using the tool.

In the recent past B of A has been repeatedly criticized for its slow pace in processing modifications before it started to catch up with demand. B of A is making great progress in helping financially troubled customers complete loan modifications and is "now leading the industry in modifications completed and modification offers extended through HAMP," says its default servicing executive Rebecca Mairone.

She praised the nation's housing counselors for playing "a critical role" in completing and filing modifications. B of A can conveniently rely on and work with over 200 counseling organizations across the country that have committed to the portal using their approved counselors "as an extension" of the B of A team, she said.

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