The Home Affordable Modification Program expires at the end of 2012 and the Treasury Department is not ruling out guideline changes before then.
The program launched in March 2009 to pay mortgage servicers for modifying loans on the verge of foreclosure. The Treasury capped its payments to servicers at $29.8 billion, according to its December transaction report. The Treasury initially expected to spend $75 billion through the program, with $50 billion from the Troubled Asset Relief Program and the rest from Fannie Mae and Freddie Mac.
Through October, participating servicers offered 1.9 million three-month trials and transferred 883,000 of them into permanent status. After redefaults are counted, the Congressional Oversight Panel, which kept watch on the implementation of the program, expected roughly 800,000 permanent modifications by the time the program expires Dec. 31.
Because the program was initially touted to reach between 3 million and 4 million borrowers, servicers have come under heavy criticism for a lack of performance along with the Treasury for not enforcing its guidelines more effectively.
When asked if servicers should be bracing for any new changes in the last year of the program, a spokesperson would not rule any action out.
“Treasury has always closely monitored its existing programs to determine if there are ways to strengthen implementation. There are currently hundreds of thousands of homeowners who are struggling with their mortgage payments but eligible for assistance through HAMP,” the official said. “We remain committed to helping as many homeowners as we can.”
The Treasury currently estimates more than 965,000 borrowers in 60-day delinquency or worse are potentially eligible for the program. They either have debt-to-income ratios above 31%, will likely pass the net-present value test that servicers use to determine if a modification is better than foreclosure, or their household still has someone employed.
More than 62% of the borrowers in the program cited a loss of income as their reason for hardship. The next closest, excessive debt, was the primary hardship for 11% of HAMP borrowers.
The program came under a series of changes since its early troubles. In the summer of 2010, the Treasury required servicers to collect all necessary documentation before starting a permanent modification. It also began releasing scorecards on servicer performance in 2011, and withheld payments to those servicers that did not score high enough.
JPMorgan Chase and Bank of America the two largest servicers participating in the program, had payments withheld for three consecutive quarters in 2011.
The Special Inspector General for TARP said in a report released last year that there is much Treasury could do, such as penalize servicers that take too long to convert trials into permanent mods.
“With just one year left for new mortgage modifications in HAMP, it is not too late for Treasury to make changes to the program,” SIGTARP said in the report, “and there remains much that it can do to improve.”
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