The number of permanent loan modifications approved under the Home Affordable Modification Program (HAMP) nearly doubled in January, after the Obama administration stepped up the pressure on mortgage services to process applications.
Nearly 50,000 homeowners were approved for permanent loan modifications in January, bringing the total number of permanent modifications under HAMP to more than 116,000. Another 76,000 homeowners have been approved for permanent modifications and need only sign the paperwork to be finalized.
Another 830,000 homeowners are participating in HAMP trial loan modifications, including 75,000 new trials begun in January. Another 250,000 homeowners have received offers for trail modifications.
"With nearly one million homeowners paying less each month and the number of permanent modifications steadily rising, HAMP is doing the job it was designed to do," said Phyllis Caldwell, Chief of Treasury's Homeownership Preservation Office. "Struggling families are receiving payment relief and the housing market is showing signs of stabilization."
Under HAMP, borrowers receiving a mortgage modification have their monthly mortgage payments to 31 percent of their gross monthly income. They must complete a three-month trial period by staying current on the new payment schedule before being approved for permanent status.
Mortgage servicers pressed to act
However, many homeowners in the program have seen their trial modification periods go on for four, five months or longer without being approved or denied for permanent status. In response, the Treasury Department announced in late November that it would set timelines for servicers to approve or deny permanent modifications and require that reasons for the decision be provided, and send Treasury personnel to monitor the process at mortgage servicers.
The nearly 950,000 homeowners currently in trial or permanent loan modifications have seen a median reduction of $500 a month in their mortgage payments, according to the Treasury Department.
With 1.3 million loan modifications begun or offered, the Treasury Department says the program is on track to reach its target figure of helping 3-4 million at-risk mortgage holders stay in their homes. According to the current monthly HAMP report, there are 5.6 million U.S. mortgages that are currently delinquent (60 days or more past due), of which 1.7 million, or just under one-third, are eligible for HAMP.
Of the nearly 4 million borrowers not eligible for HAMP, the main reason for not qualifying was that they could not meet the minimum 31 percent debt-to-income ratio, which eliminated 900,000 borrowers. Other major reasons include non-owner occupied properties (800,000 borrowers), having a VA or FHA loan, which have their own loan modification programs (700,000) and mortgage servicers not participating in HAMP (600,000). Other reasons included negative net personal value, vacant properties and nonconforming (jumbo) loans.
