Saturday, April 17, 2010

Wells Fargo Analysis: 50% Fail HAMP Eligibility

Original posted on eCreditDaily.com:

Wells Fargo has 523,336 borrowers either in trial or approved mortgage modifications as of March 31, more of them as part of the lender’s own foreclosure prevention efforts.

Of those, 144,932 are part of the government’s Home Affordable Modification Program, HAMP, with active trial and completed modifications, also as of March 31.

Wells Fargo, which services about 16 percent of U.S. mortgages, said it initiated or completed three modifications for every one foreclosure sale on owner-occupied properties from October 2009 through March 2010.

In a statement providing an update on its foreclosure prevent efforts, Wells Fargo offered a glimpse into its analysis of the HAMP program’s troubled rate of assistance, with as many borrowers falling eligibility as those approved for the full term of mortgage relief.

Wells Fargo said half of the 138,000 homeowners who have made three HAMP trial payments as of March 31, will be offered modifications for the full term. Of the rest, 30 percent are expected to be deemed not eligible after documents are received, and another 20 percent will not provide some or all required documents.

The U.S. Treasury released HAMP’s March update Wednesday.

Overall, HAMP’s approved modifications for its five-year reduced-payment term is up to 227,922 borrowers, representing about 19 percent of all trials started. The program’s number of borrowers whose trial or approved modifications have been cancelled because of default or other reasons is 158,052 borrowers – about 13 percent of those who started trial modifications.

“HAMP is the starting point in our efforts to help borrowers facing financial challenges, but we been very successful in finding other workout options when a customer is not eligible for HAMP,” said Mike Heid, co-president of Wells Fargo Home Mortgage.

On April 5, Wells Fargo initiated its part in HAMP’s new Home Affordable Foreclosure Alternatives (HAFA) program, which provides incentives to servicers and borrowers who work on short sales or deed-in-lieu of foreclosure. Although all parties have to agree on the terms and short sale price, HAFA provides principal forgiveness on leftover mortgage balances.

Heid and counterparts at other top lenders testified this week before a House panel seeking feedback on HAMP’s expansion plans into principal forgiveness. The mortgage servicing executives expressed some reservations about the fairness and expense of mortgage writedowns.

Nonetheless, Heid said that Wells Fargo had initiated writedowns before HAMP was launched in 2009. The lender completed more than 50,000 modifications, with a total reduction in principal of more than $2.6 billion.

“On average, customers received a 15 percent reduction in principal amounting to greater than $50,000, and when combined with rate reductions and term extensions their average monthly payments dropped by 25 percent under the terms of their loan modification agreements,” Heid said.

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