Wednesday, December 16, 2009

BofA Lacks ‘Sense of Urgency’ to Convert HAMP Mods

Original posted on the Housing Wire by Jon Prior:

Two weeks after the Treasury reported Bank of America’s (BAC: 15.355 +1.09%) 98 permanent modifications eight months into the Home Affordable Modification Program (HAMP), BofA clarified the numbers.

According to the Treasury report, BofA has just over 1m HAMP-eligible loans in its estimated 60-plus day delinquency portfolio. Jack Schakett, the credit loss mitigation strategies executive at BofA, explained in a conference call that number is closer to 340,000.

The 1m figure, he said, is the total amount of loans that meet the basic criteria for the program. After speaking with customers and moving through that portfolio, BofA has crossed off borrowers who’ve vacated the home, are unemployed or have enough income to afford a payment – meaning their debt-to-income ratio is below 31%.

“Known customers not qualified goes to 600,000,” Schakett says. “As we go through the process of determining who isn’t eligible, we extrapolate that to the customers we haven’t talked to.”

So, Schakett argues, when looking at the more than 158,000 HAMP trials started under BofA, “it’s a better success rate.”

As far as volume, 98 permanent modifications is not “a better success rate” when compared to the 3,537 permanent modifications converted by Wells Fargo (WFC: 25.834 +0.68%), the 4,302 permanent mods converted by JPMorgan Chase (JPM: 41.3999 +1.32%), and even the 271 converted by CitiMortgage.

Schakett is quick to agree and said BofA has not created the right amount of urgency in customers to return necessary documents.

“All of us have very few conversions. It’s simply the process itself. We clearly did not create the sense of urgency we would like in these customers to get these documents in. The other is focus. As we’ve shifted focus away from the start process, we are obviously focusing now on conversion,” Schakett said.

When the Treasury released its report, more than 16,000 borrowers with an active HAMP trial under BofA had no documentation into the bank. After a wave of phone calls and express mail notifications of incomplete documentation (NOIs), that number is down to 2,000. Currently, there are 10,000 BofA borrowers with all of their documentation and underwriting done and are in the final conversion stages, according to Schakett.

But Schakett said that 70% of the delinquent loans will not be eligible for HAMP, pointing out the importance of the bank’s own modification programs. In the past two years, he said, more than 630,000 borrowers received a modification – 25% of the industry total, according to Schakett.

He said the bank is pushing to keep as many borrowers from falling out of the program at the Dec. 31 deadline. Borrowers without full documentation by that deadline could be dropped by the program, Schakett said.

“We’re in a full court press to have all docs in,” Schakett said.

He added that numbers will be better in December and will rise again in January.

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