The Treasury's Mortgage Mod program Is Dying As Trials Begin To Slow, And Debt-To-Income Ratios Worsen


Photo: Treasury

From Treasury: HAMP Servicer Performance Report Through April 2010

Click on table for larger image in new window.

About 299,000 modifications are now “permanent”, and 277,000 trial modification cancelled. There is still a huge number of borrowers in limbo. According to HAMP, there are 637,353 “active trials”.

As of April, there were 1,214,085 trials started, and as of last September there were 553,568. That gives 660,000 trials started over the last 7 months – about the same number as “active trials”. Ouch. That suggests that the HAMP trial period is about 7 months!

The second graph shows the cumulative HAMP trial programs started.

Notice that the pace of new trial modifications has slowed sharply from over 150,000 in September to around 47,160 in April 2010. This is slowest pace since the program started, probably because of two factors: 1) servicers are now pre-qualifying borrowers, and 2) servicers are running out of eligible borrowers. The program is dying …

On page 6 is some new data. Not surprisingly the servicers who verified income before starting a trial modification have a much higher conversion rate than servicers that allowed borrowers to state their income.



Debt-to-income ratios worsen

If we look at the HAMP program stats (see page 5), the median front end DTI (debt to income) before modification was 44.9% – up slightly from 44.8% last month. And the back end DTI was an astounding 80.2% (up from 77.5% last month).

Think about that for a second: over 80% of the borrowers income went to servicing debt. And it is over 64% after the modification. Do they have a life?

Just imagine the characteristics of the borrowers who can’t be converted!

In summary: 1) the program is dying, 2) the borrowers DTI characteristics are poor – and getting worse, and 3) there are a large number of borrowers in modification limbo.

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