Update: 3/4/10: HAMP is truly a failure after one year; moreover, lenders use its process to distract homeowners while they foreclose as fast as they can. Article here.
——Original Post——
Five months ago, the Obama Administration released a program that was supposed to reach up to 3 to 4 million at-risk homeowners by providing mortgage servicers with incentives to offer loan modifications. We were skeptical (see article). Today, the Treasury released its Servicer Performance Report through July 2009. The report shows that out of an estimated 2,705,302 eligible borrowers that are more than 60 days delinquent on their home loans, only 9% or 235,247 have even received trial modifications. When you add in the number of eligible borrowers that are less than 60 days delinquent, presumably, the number would be even lower. Add in the number that have received final modifications, and well…you get the idea.
So, why are servicers so reluctant to offer loan modifications? A recent New York Times article suggests that even when modification is best for the borrower and for whoever owns the loan, the potential to collect foreclosure-related fees may still provide servicers with enough of an incentive not to offer loan modifications. In other words, the ability to collect fees when a foreclosure occurs, when a late payment is made, or when force-placed insurance, appraisals, title searches or legal services are required may be more enticing than the fees collected for a modification.
While that is just one theory as to why modifications are not being offered, the numbers in the newly released report don’t lie. Loan modifications are happening at an abysmally low rate. Foreclosures march on, the economy remains in shambles, and servicers collect fees. Democrats are rattling the sabers — by talking about reviving the cramdown bill. Article. Politicians talk, the industry does what it wants. The more things change, the more they stay the same.
Filed under: National Foreclosure News
