Washington-While the government's HAMP program has had limited success, proprietary loan mods have become an important safety net.
Treasury data show 1.2 million borrowers have entered into HAMP payment trials-but only 346,800 have received permanent mods. Almost 430,000 borrowers have dropped out of the trials, despite having their monthly payments reduced by $500 on average.
Obama administration figures show 49% of distressed homeowners who did not qualify for a permanent HAMP mod have received assistance through proprietary mods.
HUD secretary Shaun Donovan said only 11% of the borrowers in the HAMP payment trials have gone into foreclosure or lost their homes through a short sale. Another 26% of borrowers that dropped out of the HAMP trials as of late spring are still being evaluated for a proprietary mod.
Almost 10% of borrowers have become current on their loans and 1.1% paid them off. "The facts are that a large majority who enter trial mods are still successfully able to stay in their homes through...alternatives," said Donovan. Hope Now alliance data show servicers completed 104,300 proprietary mods in April, compared to 68,000 HAMP mods. More flexible proprietary mods provide aid to homeowners that do not qualify or "fall out" of HAMP.
The HUD secretary noted the 2.8 million borrowers have received restructured mortgages through HAMP, the FHA and proprietary programs during the 12-month period ending April 30. "This is nearly three times the number of foreclosures completed during this same period," he added. It also became evident that HAMP servicers have shifted their attention in the past few months to culling ineligible borrowers from their rolls that had been treading water for months. Previously, the emphasis was on moving borrowers in the payment trials into permanent mods. The latest HAMP data show that 152,000 borrowers had been dropped from trial mods in May, compared to 122,500 in April.
Donovan told reporters the high number of trial cancellations was expected. "We pushed them to do very strong quality control before they removed someone from a trial modification." HAMP servicers in May converted 47,700 borrowers from trials to permanent mods, down 30% from April. Permanent HAMP mods were up to 340,500, after subtracting 6,360 redefaults.
