From propublica.org:
For the past year, we’ve been digging into the administration’s fumbling efforts. We’ve crunched a lot of numbers along the way, and now we’re sharing what we found – including loads of previously unreported data.
Using new Treasury Department figures, previously unreleased documents obtained through Freedom of Information Act requests, and new analyses of state and industry data, we have assembled the most detailed look yet at how the the mortgage industry and the government’s main effort, the Home Affordable Modification Program (HAMP), have failed homeowners. It provides crucial context to the ongoing government investigation into mortgage servicing practices, which might lead to reforms of how banks and servicers handle homeowner requests for modifications.
Here’s what we learned:
- Only a fraction of struggling homeowners are getting help.
- Mortgage servicers are only reaching a small fraction of struggling homeowners.
- The largest servicers, especially Bank of America, have left most struggling homeowners in limbo without either modifying or foreclosing.
- HAMP itself hasn’t made much difference: It hasn’t led to an increase in modifications.
- Just over one in five homeowners who applied for a HAMP mod have received a permanent modification.
- And in one quarter of rejections, mortgage servicers – notorious for losing documents – have cited missing documents as the reason.
- Here are your overall chances of getting a mod with each of the top servicers.
- Treasury claims servicers are improving, but its own data show otherwise.
- When servicers offer a mod, it’s generally more affordable than mods used to be.
- But instead of mods, servicers have recently been offering more repayment plans, which actually increase struggling homeowners’ payments.
- In the end, most government funds set aside to help homeowners are still unused.
The number of modifications each month has remained dramatically lower than the number of homeowners behind on their mortgages.
Although Treasury Department officials and mortgage servicers claim the industry has gotten better at handling modifications, the average rate of modifications in the past two years is not significantly different than the rate before HAMP launched.
The data for the total number of modifications provided by mortgage servicers comes from HOPE Now, an industry-headed coalition.
Ideally, servicers would be in contact with troubled borrowers, discussing possible alternatives to foreclosure. But servicers aren’t doing that with most homeowners at risk of foreclosure-and they haven’t improved much. Servicers generally have multiple alternatives to foreclosure, including modifications, short sales and deeds in lieu, all of which are generally better outcomes for both homeowners and investors.
“If you have names, addresses, and phone numbers for your customers, it seems like you ought to be able to do better than reaching one out of three,” said Mark Pearce, formerly North Carolina deputy commissioner of banks.
We did an analysis of Moody’s data on 300,000 subprime loans that had been more than three months behind in the last year or so. All had been packaged into mortgage-backed securities.
Moody’s reported that getting a modification takes several months at all of the servicers, though some were worse than others. The worst was JPMorgan Chase, where the average modification occurred 11 months after the borrower fell behind. At Ocwen, the fastest, it was seven months.
The vast majority of subprime delinquencies at Bank of America, the nation’s largest servicer, haven’t been resolved either way. About 41 percent of Bank of America’s loans in this analysis hadn’t even begun the foreclosure process, despite an average delinquency of 13 months. Another 27 percent of homeowners were in foreclosure but hadn’t yet lost their homes-the average delinquency there is two years.
About 1.3 million homeowners who have applied for a HAMP mod were denied without being placed in a trial, a three-month period that is supposed to give homeowners a chance to show they can afford the new payments.
Meanwhile, getting placed in a trial is just the beginning of a disappointing process for many homeowners: More than half of trials were canceled, most of the time despite the fact that the homeowner had made all of the payments. Trials have also frequently lasted far longer than the three months they are supposed to last. About six percent of those who’d applied were in a trial as of December.
Friend owed 800K on a house currently valued at 500K. Bank modified the loan to a 40yr fixed on the current value of 500K with a balloon payment of 300k at the end of the 40yr term. Bank gets to keep the full 800K on their books. Friend says he will be dead before the end of the 40yr term. No comp killers for the neighborhood. Everybody wins, right?
40 year lease. Good if you don’t have to move and the payments are below market rents.
I love that solution, though it could still be a short sale if he dies in the next 10-20 years – depending on his location.
I think every homeowner would take that deal:
$800,000 @ 5% for 30 years = $4,294.57
$500,000 @ 5% for 40 years = $2,410.98
Save $1,883.59 per month?
That’s two Cadillac payments and a trip to Maui every year!
cali,
I know you’re a nice guy and you mean well. I have people sending me emails wanting me to black-list you. Can you give it a rest for a while? Or find some good in this world?
Alright. See you in a couple of weeks. Didn’t think the comment was really all that negative. It’s a 40 year lease that’s honestly a good deal if you plan to stay there. There’s even a way out of the money call option for free.
It’s a 40 year lease that’s honestly a good deal if you plan to stay there. There’s even a way out of the money call option for free.
You have it in you!
I think it’s the relentless nature – even shadash mixes it up, making the content much more enjoyable.
But it kind of confuses the market, don’t you think? If everyone who is underwater did this the market would freeze even more so than it is today. I really believe the banks should be required to mark to market. And no more MBS or CDO’s. Own what you issued in loans. Otherwise the risk is not controlled.
I think every homeowner would take that deal:
$800,000 @ 5% for 30 years = $4,294.57
$500,000 @ 5% for 40 years = $2,410.98
Save $1,883.59 per month?
That’s two Cadillac payments and a trip to Maui every year!
________________
Sign me up, wiki wiki.
#1 Sounds a little reverse-mortgage-ish to me. Does your friend have heirs?
The Lakers have won 8 straight JtR. Be Happy 🙂
Sorry to go off topic, but truly a sad day – they’re keel hauling the Cap’n:
http://lifeinc.today.com/_news/2011/03/09/6228655-capn-crunch-sails-into-obscurity?GT1=43001
ok so i have been coming here to read about RE for years now and i just realized that this site is hosted by STEVE CARELL…!jesus H christ…! i just saw his image up in the right hand corner on the main page….yes…it is steve carell…!
is has jimklinge.com but that is probably a pseudonym….i swear it is steve carell…..?!?!?!
re: #1
Does the government backstop 40 year mortgages? While most homeowners would jump at this, I can’t imagine too many investers lining up to purchase them – unless the investers happen to be all of us.
“If you have names, addresses, and phone numbers for your customers, it seems like you ought to be able to do better than reaching one out of three.”
Obviously Mr. Pearce has not examined servicing files or watched a loss mit department in action. Most files are row after row of “left msg to someone”, “left msg on am”, “disconnected”, etc. Most people do not open their doors if you knock. The main reason mods aren’t working is the vast majority of borrowers don’t even care or understand how they work. There is a savvy, vocal minority that does understand and they try to shoot for the moon in their negotiations then complain bitterly when they get denied.
this site is hosted by STEVE CARELL…!
My nose is bigger…
The Lakers have won 8 straight JtR. Be Happy
Very happy with my Lakers these days, and looking for a big weekend!
Somebody has to be moderator, and it’s better to be pre-emptive.
Right now, cali and a few others think I’m a jerk.
If I let it go, it breeds more downer-type comments – then when I jump in too late, the whole board wants a piece of me.
Better now than later.
10.Sorry to go off topic, but truly a sad day – they’re keel hauling the Cap’n:
LOL
He was a good man, I never had a cross word with him.
Tried to work with Wells Fargo. Income same as when we bought house and not upside down (i.e. no “hardship”) but need to refinance to new lower rates (bought years ago at much higher rate) to make home affordable – have been making payments but just barely. Because we do not meet today’s criteria for jumbo loans (i.e. new lower debt to income ratio and new requirement of $100k in reserves) would not refinance even though we are in identical shape as when original loan was issued (income, debt to income, etc. – only the new loan criteria has changed). Not only would they not help us, they cancelled all of our outstanding credit lines which lowered our credit score. Solution? Sell house. Sad.