HAMP Rejections Soar; New Modifications Dwindle
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- Kirk Haverkamp | May 21, 2010
New borrowers admitted to the government’s Home Affordable Modification Program (HAMP) fell in April to their lowest level since the program began, while the number of homeowners rejected for permanent assistance continued to climb.
Only 47,000 homeowners were approved for new trial loan modifications in April, the fewest since May 2009, two months after the program was established. By contrast, over 122,000 ongoing trial modifications were cancelled after it was determined the homeowners could not qualify for permanent status.
New admissions to the program, which to date has provided at least temporary mortgage relief to 1.2 million homeowners, have tapered off in recent months after rising steeply through last summer and fall. Meanwhile, efforts have increased to clear out a backlog of homeowners with trial loan modifications who have been waiting to be approved or rejected for permanent modifications.
Rejections nearly equal permanent modifications
Over the past two months, 189,000 homeowners originally admitted to the program have been rejected for permanent loan modifications, compared to less than 89,000 in the period from March 2009 to February 2010. The nearly 278,000 total cancellations very nearly equal the 299,000 homeowners who have obtained permanent loan modifications under the program, meaning the program’s success rate is approximately 50 percent.
The slowing rate of new admissions, along with the increasing pace of rejections, has many observers predicting that the program is beginning to wind down, far short of its original target of assisting 4-5 million homeowners, and that most homeowners who can qualify for the program have already applied.
However, others attribute the lower admission rate to lenders more closely scrutinizing new applicants to the program, so that those now being admitted are the ones more likely to qualify for long-term loan modifications after completing their trial periods. Approximately 600,000 homeowners remain in trial modifications under the program.
The program is designed to assist homeowners in financial difficulty by lowering their monthly mortgage payments. Those admitted to the program must complete a three-month trial period to demonstrate the reduced payments will enable them to stay current on the loan, after which they can be approved for permanent status.
Lack of documentation blamed for delays
However, participants in the program must also meet other guidelines, particularly in terms of income and outstanding debts, in order to qualify for permanent modifications. In the early months of the program, many borrowers were granted trial modifications without requiring documentation of income or debts.
Now that that documentation is being sorted out, it is being determined that many homeowners on trail modifications do not meet the income, debt or other requirements to be granted a permanent modification, and so are being put out of the program. Meanwhile, the three-month trial period has stretched out to an average of seven months as homeowners in the program wait to be approved or denied for permanent status.
The Treasury Department, which administers HAMP and released the program report this week, estimates that approximately 30 percent of homeowners who are at least 60 days delinquent on their home loans are eligible from HAMP. It estimates that of 6 million homeowners at least 60 days delinquent in the fourth quarter of 2009, 1.7 million would qualify for the program.
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