Foreclosures Rise as Loan Mods Show Slight Decline

By:: Kirk Haverkamp | November 02, 2010

Slightly fewer homeowners were granted long-term foreclosure protection in September, at the same time the number of new foreclosures ticked upward as well.

A total of 147,425 mortgage loan modifications were completed in September, about a 1 percent decrease from 149,098 in August, according to figures released today by the Hope Now Alliance. Meanwhile, foreclosure starts were up nearly 2 percent, to 249,609, up from 245,015.

Mortgage delinquencies were largely unchanged, with under 3,256,000 people past due on their loans by 60 days or more, a decline of less than 1,000 from the previous month. Delinquencies of 60 days or more have been declining throughout the year, after averaging nearly 4 million a month during the first quarter of 2010.

Rate of new loan mods holding steady

Loan modifications have been continuing at a fairly steady rate throughout the first 10 months of the year, while foreclosure starts have been trending back upward after stalling out in the spring. Foreclosure starts have outpaced completed loan modifications in 2010, with nearly 2 million new foreclosures compared to 1.4 million long-term loan modifications.

Government-backed loan modifications have been declining in recent months, while private, proprietary loan modifications conducted on a lender’s own terms have been increasing just as quickly. Government-backed Home Affordable Modification Program (HAMP) loan modifications made up only about 1 in five permanent loan modifications in September, with 27,840 completed compared to 147,425 proprietary modifications.

HAMP seen as model

Critics have pointed to the dwindling HAMP numbers, and a total of only half a million permanent loan modifications to date, compared to 3-4 million initially projected, as evidence the program has not worked. However, others credit the program for providing a model for lenders to follow with proprietary modifications and spurring them to perform more of them.

Nearly 80 percent of proprietary modifications performed in September provided a reduced monthly mortgage payment to homeowners, while more than half of all proprietary modifications this year have reduced principal and interest payments by 10 percent or more.

The Hope Now Alliance is an industry-backed organization comprised of mortgage lenders, investors, consumer debt counseling agencies and others that works to promote alternatives to foreclosure for at-risk homeowners.

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