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.