The latest update on the Obama Administration’s foreclosure-mitigation effort, HAMP, shows that cancellations of “permanent” mortgage modifications, or re-defaults, have increased 57 percent from a year ago.
At the same time, the running total of active mortgage reductions through March of this year is up to 866,078, about a 9 percent increase from a year ago.
That wide disparity in the productivity of HAMP (Home Affordable Modification Program) — based on the update provided by U.S. Treasury and housing officials Friday — bolsters the claims by a government watchdog released last month that called the program’s re-default rate “alarming.”
At the end of March 2012, active permanent modifications stood at 794,748, while cancelled modifications were at 198,774. A year later, active modifications are up 9 percent to 866,078 and cancellations have surged 57 percent to 312,561.
Moreover, the increase in “permanent” mortgage reductions — representing borrowers who continue to pay on time — from February to March of this year came in at 11,193 — the lowest monthly increase in at least two years. A year ago on March 2012, permanent modifications increased 19,940. And the average over the past 13 months is 15,746.
A permanent modification is canceled when the borrower has missed three consecutive monthly payments.
Treasury officials assert that HAMP modifications outperform private industry mitigation programs. Data shows that the majority of homeowners who receive assistance from HAMP have “a high likelihood of long-term success” avoiding foreclosure, officials say.
But the watchdog report last month from the Special Inspector General for TARP, or SIGTARP, uses the same data to conclude that “re-defaulted HAMP modifications often inflict great harm on already struggling homeowners when any amounts previously modified suddenly come due.”
Essentially, that means borrowers who tried but failed to sustain a HAMP mortgage fix may end up deeper in debt than before going through a trial modification sponsored by the government.
“Because re-defaults are so harmful to all, Treasury should develop a better understanding of why homeowners re-default, and the characteristics of loans that are more likely to re-default,” concluded SIGTARP, which oversees the bailout vehicle, Troubled Asset Relief Program, that helps fund HAMP.