Wednesday, January 20, 2010

HAMP: 66,465 Permanent Mods

Original posted on Calculated Risk:

From Treasury: Administration Releases December Loan Modification Repot, Update on Conversion Drive

HAMP Click on graph for larger image in new window.

Just over 66,000 modifications are now permanent, and this shows about a 43% failure rate (loans permanent divided by loans permanent + loans no longer active)

Here is the link at Treasury. See here for a list of reports.

If there were 270,000 cumulative HAMP trial modifications in July - how come there were only 66,465 permanent mods and 48,924 disqualified modifications by the end of December? The numbers don't add up.

What happened to the other 150,000+ modifications? I guess they have all been extended until the end of January.

And of the 787,231 active trial modifications, are all the borrowers current? My understanding was the HAMP data would show how many trial modifications had started, and the redefault rate by month. That key data is still missing.

Original posted on FT Alphville by Tracy Alloway:

As Calculated Risk notes, you have to wonder why, if there were 269,955 cumulative Hamp trial mods in progress at July 2009, there are now only 66,465 permanent mods and a reported 48,924 disqualified mods at the end of December.

Did the missing 154,566 get additional (beyond five-month) extensions?

Then you have to wonder about the reported Hamp modifications by investor type.

In November, for example, mortgage-servicer Wells Fargo reported zero private (investor) modifications and 24,000 mods for its own portfolio. But December’s numbers show 23,910 private mods and 5,041 portfolio ones.

It’s quite a big change:

What’s going on?

And originally posted on Calculated Risk an exchange between Meredith Whitney and Jamie Dimon on the JPMorgan conference call this morning (ht Brian):

Whitney: [W]e're reaching a critical point in terms of all of the loan modification efforts and this is an industry question but then how it specifically affects your Company, given the fact that the industry feedback and statistics on the loan modification efforts are not good, so you question what's the next initiative and the issue of principal forbearance. How much momentum do you think that has, can you comment on what stage we are in terms of obviously the extension ends [soon] with the last slug is over in February, so where do you think we are in terms of the government’s efforts to influence banks to do certain things?

Dimon: Well remember we do modifications of our own and we do the government modifications and I do think they're kind of new, it was complex, and I think people will get better at it over time, Meredith. We have not thought of a better way to do it than loan by loan, which is does the person want to live there, can they afford to live there, and we really think that the payment, how much you're paying is more important than principal. Even if you are going to do something on principal, to do it right you have to do it loan by loan and it effectively comes a similar kind of thing. The difficulty is the loan by loan part and we've asked the government and I think they tried to streamline a little bit to have programs because there's too much paperwork involved in it so a lot of the reasons we're not getting to final modifications half the time we don't finish the paperwork, so they need the lower payments but they weren't finishing the paperwork so we're trying to get better at it, honestly, we rack our brains to figure out if there's a better way to do it and you can do it more macro than loan by loan but once you start talking about macro, you're going to get involved in a lot of issues about whether the people live there, whether they have the ability to pay, whether they were honest when they first told people how much their incomes were, so we're working through it.

Whitney: Okay, do you get a sense that there's something right behind HAMP, that there’s another solution for the government or is it more your efforts?

Dimon: We're trying to do this, look, we're trying to have ideas and they are trying to have ideas but if we had a brilliant one we would be very supportive of doing it. We want to do the right thing for the people.

Whitney: Okay, so a point of clarification on your answer, issue of principal forbearance is not something that people should be overly concerned about with respect to reserves and capital for the bank?

Dimon: No, I think if there's a macro government force on something like that you could have a fairly significant effect on loan loss reserves and losses, etc.

Whitney: But is that a real, any momentum?

Dimon: Honestly Meredith you probably know as well as we do.

Whitney: I don't know. I can't help myself on that one.
A few comments:
  • Most completed modifications are bank programs, and not HAMP. It is worth remembering that HAMP is just a subset of all the programs (the HAMP numbers will be released today).

  • Thinking that the "payment" is more important than the "principal" (or price when buying) is part of the reason we have this problem.

  • "Paperwork" is mostly qualifying borrowers in arrears.

  • Dimon apparently isn't aware of any momentum for a macro principal reduction program, but if one came along it would have a "significant effect on loan loss reserves and losses".
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