Obama administration officials like to point out that at least 75% of non-GSE borrowers entering the HAMP loan modification program are benefiting from principal reductions.
But the actual number of borrowers that receive a reduction in principal does not sound as impressive. HAMP servicers approved 16,500 loan modifications in August, but only 5,070 of those involved principal reductions, according to the latest
In July 5,160 borrowers received a HAMP principal reduction. The median amount of forgiveness came to $63,600.
The GSE regulator does not permit Fannie Mae and Freddie Mac to participate in principal reduction programs, which means nearly half of the borrowers entering HAMP are not eligible at all.
Looking outside the HAMP program, HUD secretary Shaun Donovan expects to see a surge on principal reductions in the third quarter.
A recent report by the Office of the Comptroller of the Currency found that the number of proprietary loan modification trials jumped 75% to 178,500 units in the second quarter. (The comparison is to 1Q.)
“As these trials become permanent, we expect third-quarter data to show a substantial increase in principal reduction,” Donovan told a housing forum recently.
Most of the anticipated principal reductions will be paid for courtesy of the $25 billion foreclosure and servicing settlement the five megabanks and 49 state attorneys general hammered out earlier this year.
Between March 1 and the end of the second quarter, 28,000 borrowers were offered principal reductions modifications, according to the first report by the AG settlement monitor.
