Inspector General: Modification Progress Won't Be Sustainable

A new TARP IG report on servicer performance under the Home Affordable Mortgage Program says that even though loan restructuring efforts improved in recent months, mortgage firms will not be able to sustain the pace. In January and February, residential servicers approved roughly 50,000 permanent loan modifications per month, a vast improvement over earlier efforts. (Roughly 168,700 permanent modifications have been written since August.) However, the Troubled Asset Relief Program IG notes that the number of troubled homeowners starting the three-month HAMP payment trials is declining while at the same time servicers are tightening standards for new entrants. In addition, servicers are concerned that the 835,200 borrowers currently in payment trials include a sizeable number of homeowners who are unable-or unwilling-to make the required payments. Also, it appears that some homeowners are using the HAMP trials to forestall foreclosure. "Several of the servicers interviewed reported concerns about homeowners trying to game the system in this fashion," the report says.