The quarterly report released by the Office of the Controller of the Currency and The Office of Thrift Supervision shows that some home loan modifications are faring better than others. Across the board however, re-foreclosure rates are still near 50% for loans modified during the past year.
Those borrowers who used Obama’s HAMP the Home Affordable Modification Program to refinance seem to be fairing the best, if their loans were permanently modified. During the first quarter of this year, only 17% of those that were approved for a permanent HAMP modification in the last three months were behind 30 days on their payments and less than 8% were behind by 60 days.
Industry wide results were not so good at the three month mark. Overall, after just three months under a home loan modification one quarter of all loans were 30 days overdue and at the 60 day mark more than 1 in 10 were in default.
Affordable payments in proportion to income and the trial program that HAMP has in place are thought to be part of the reason for the lower defaults for those loans modified under this program. Obama’s program lowers interest rates drastically, many being as low as 2% for the first five years and also extends home loans by up to 40 years. This cuts homeowner’s monthly payments, in many cases by hundreds of dollars. The median savings is $514.00 per month under HAMP.
HAMP however has not been all success. To date there have been about 1.2 million applications for the program with only about 340,000 or just 27% of those applications being approved for a permanent modification. Approximately 1/3 of applicants have dropped out during the three month trial period and others were not able to provide the information necessary to be approved.
The first quarter report showed a slight glimmer of home for the mortgage industry. Even though the re-default rate is still high, delinquency rates did drop slightly for the first time since June 2008 when the reports first began.
Industry experts are still predicting high default rates to continue for some time. Critics of the HAMP program still believe that eventually more than 50% of all modified loans under this program will go into default.
To read the full report visit http://www.occ.gov/ftp/release/2010-69a.pdf.