HAMP Share of Loan Mods Shrinking

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Mortgage servicers are granting more private loan modifications to financially stressed homeowners than they did one year ago, even as they're scaling back on modifications performed under the federal Home Affordable Modification Program (HAMP).

New figures from the HOPE NOW alliance show that lenders granted 186,000 proprietary mortgage loan modifications in the third quarter of 2012, a 15 percent increase from the 162,000 performed during the same period in 2011.

At the same time, loan modifications performed through the government's HAMP initiative are down significantly from their 2011 levels. Although the government has not yet released full figures for the third quarter, through July and August there were only 33,000 HAMP permanent modifications completed, with September data not yet available. By comparison, there were 94,000 HAMP permanent modifications completed during the July-September period of 2011.

Looking back to the last quarter for which full data is available, government figures indicate there were 50,000 permanent HAMP loan modifications performed during the second quarter of 2012, compared to 93,000 in the second quarter of 2011.

HAMP More Favorable to Borrowers

Both proprietary and HAMP mortgage loan modifications are performed at the lender's discretion. HAMP modifications tend to have stricter criteria, including a requirement that a borrower's post-modification monthly payments cannot exceed 31 percent of their monthly income. The criteria for proprietary, or private, loan modifications are determined by the lender itself.

Borrowers generally receive more favorable terms under a HAMP modification than they do through a proprietary one. The Treasury Department reports that borrowers receiving permanent HAMP loan modifications have reduced their monthly mortgage payments by an average of 38 percent since the program began, with an average reduction of $539 per month. All borrowers must receive a payment reduction under HAMP.

HOPE NOW doesn't provide specific data on how much borrowers have saved through private modifications, but reports that 82 percent of all proprietary mortgage loan modifications in the third quarter of the year involved reductions of loan principle and interest, with 73 percent of all modifications featuring a reduction of 10 percent or more.

Private Loan Modifications Dominate

Although the federal HAMP initiative has been more widely publicized, proprietary modifications have actually accounted for the great majority of mortgages modified in recent years. HOPE NOW reports there have been 4.74 million proprietary loan modifications performed since 2007, compared to 1.08 million permanent HAMP modifications since that program was launched in the spring of 2009.

HOPE NOW is a mortgage industry led initiative seeking to implement a coordinated approach to help homeowners avoid foreclosure.

First published on MortgageLoan.com at: https://www.mortgageloan.com/hamp-share-loan-mods-shrinking-9287

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