Servicers that are part of the five-year old Hope Now alliance completed their 5 millionth loan modification in the third quarter.
"This is an important milestone," said Financial Services Roundtable president Steve Bartlett, “but we have a long way to go. We still have several million mortgages that are underwater and several million that are delinquent.”
The voluntary group includes bank and nonbank servicers, housing counselors, nonprofit groups and government agencies.
Over the past four years, private servicers completed 4.1 million proprietary modifications. In general, re-default rates have declined as servicers focused on reducing the borrower's monthly payment to affordable levels.
Since 2009, more than 80% of newly modified loans are performing at less than 90 days past due after the first 18 months.
In addition, servicers have completed roughly 850,000 mods that meet government standards under the Home Affordable Modification Program.
Despite all these efforts, "we know much more needs to be done," said Hope Now executive director Faith Schwartz.
Mortgage Banking Association senior vice president Steve O'Connor noted that delinquency rates have improved since mid-2010 but added that 2012 will be another challenging year with high unemployment and modest economic growth.
At the same time, there is "shadow” inventory of 4 million loans that are seriously delinquent or in the foreclosure process that could lead to more distressed sales.
"We need to find a systematic way to deal with that oversupply," O'Connor said. MBA is hoping the Obama administration will move forward with a program that provides financing for investors to purchase REO. Such a program would "help stabilize the market," he said.
