HAMP report: Banks not doing the Job

The taxpayer is being ill-served by the banks we bailed out, the same banks that signed contracts with Treasury to modify eligible mortgages and prevent foreclosures.  The August report on the HAMP program confirms that a homeowner’s chances of negotiating an alternative to foreclosure depend mightily on which company services their mortgage.  On a number of performance measures, Bank of America is falling woefully short of even the poor performance of servicers as a whole.

 For example, roughly half a million homeowners had temporary HAMP modifications canceled, for missing payments, or more likely, due to lost paperwork.  Of those unfortunate families, about 45% overall have been offered an alternative modification option outside of HAMP.  Bank of America, however, offered alternative modifications to fewer than 25% of this group.   Chase, in contrast, offered alternate mods to 60% of the HAMP cancellation victims.

 Similarly, another 600,000 homeowners were rejected for even a temporary HAMP modification.   Of that group, 31% overall were offered alternative modifications, but BofA made such offers to fewer than 12%. 

 BofA has also mastered the art of false hopes.   It has converted only 26% of trial modifications to permanent ones, while servicers as a whole have achieved a rate of over 50% (still terrible, but it’s all relative.)   Over half of BofA’s trial modifications are more than six months old, despite the fact that they are supposed to convert to permanent or be canceled after three months. 

 Bank of America services the former Countrywide portfolio, plagued by predatory loan originations and servicing errors.  If anything, BofA should be working harder than other servicers to prevent foreclosures.  While HAMP certainly has design flaws that hamper its ability to turn around the foreclosure crisis, servicer performance is a serious issue, and some banks are either unwilling or unable to honor their program contracts.

 

 

Comments

[Buster Siren]

The volume of mortgage loan offerings was lower the past 2-3 weeks, which is typical of the period leading up to quarter end as the focus has been on settling pools that traded in August. you can expect that activity will pick up as we approach the start of the fourth quarter and sellers move forward with their year end objectives.

Currently, the largest loan offering in the market is 300mm being offered by a bank. The Seller included both non-performing and lower quality performing loans.

The bank was accepting bids this week has been an active seller in 2010, however there have been a number of past instances where their offerings did not trade.

The perception among some investors is that there has been opportunity for better buying in Non-performing arena in the past couple months compared with the first four months of the year. Partly this may be that buyers have adjusted their expectations, but also there may be a little more opportunity now for post trade negotiation than during the mad scramble for paper over the early portion of the year.

In loan servicing there has been an increase in rate of foreclosure start actions and completions. A month over month increases in referrals to foreclosure of 30% between June and July, and 30% again July to August. This is largely a direct result of loans falling out of HAMP trial periods and the borrowers are no longer eligible for further relief under HAMP.

In addition, foreclosure completions have been increasing at a rate of 10-15% month over month for the past three months. You can expect foreclosure volumes to plateau at elevated levels compared with the past year.

-- Richard Aquilone

[julie cornelius]

I've been trying to qualify for BOA's home modification loan for 16 month's! Its been a nightmare. I went to BOA yesterday to ask for help...to my suprise they said they would help. I'm not getting my hopes yet.