5 Million Loan Modifications Allowed
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- Peter King | November 15, 2011
Nearly 5 million homeowners have obtained mortgage loan modifications over the past four years, according to figures released today by the HOPE NOW Alliance.The mortgage-industry supported coalition reports that since 2007, lenders have privately modified mortgage terms on 4.11 million at-risk mortgages, along with another 857,000 mortgage loan modifications performed under the government’s Making Home Affordable Program.
The numbers reflect a changing attitude toward how distressed mortgages are handled since the onset of the housing crisis, according to Faith Schwartz, HOPE NOW executive director.
“When HOPE NOW started reporting data at the end of 2007, loan modifications were barely measurable. Homeowners either paid their mortgages or forfeited their homes,” Schwartz said. “However, over the past four years the housing crisis has taught us to re-think helping distressed homeowners through an unprecedented level of collaboration, funding, manpower and expanded resources.”
Ongoing effectiveness unclear
It’s not clear how effective those loan modifications have been in helping homeowners stay current on their mortgage payments and avoid default or foreclosure. According to the U.S. Department of the Treasury, more than 136,000 of the 857,000 permanent loan modifications granted under Making Home Affordable (MHA) have been canceled.
Specific numbers are not available for private (proprietary) loan modifications performed under lender’s own guidelines, but Treasury Department figures indicate that borrowers obtaining MHA loan modifications are more successful at avoiding subsequent default than are borrowers with private sector loan modifications.
According to the Treasury Department, just under one in five borrowers who obtained MHA loan modifications in the first half of 2010 were at least 60 days delinquent on their mortgages 12 months later, compared to nearly one in three obtaining proprietary loan modifications. MHA loan modifications typically provide greater financial relief to borrowers than proprietary modifications do.
MHA loan modifications are conducted under the government’s Home Affordable Modification Program, commonly known as HAMP.
Foreclosures, delinquencies on the decline
Both mortgage delinquencies and foreclosures have declined significantly over the past year, according to figures from HOPE NOW. There were a total of 2.81 million mortgages at least 60 days past due but not in foreclosure in the third quarter of 2011, down 11 percent from 3.17 million one year earlier.
Newly begun and completed foreclosures showed even bigger declines, with 600,000 foreclosure starts reported in the third quarter, down 15 percent from 709,000 in the same period in 2010. Completed foreclosures showed a 36 percent annual decline, with 200,000 in the third quarter of 2011, down from 310,000 one year earlier. However, those declines are at least partly due to the more deliberate foreclosure processing procedures lenders have had to implement in the wake of last year’s robo-signing scandal.
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