HAMP remains incapable of filling the imminent default gap

Real Estate Agent with Brentwood Real Estate, Short Sales, Foreclosures, HAFA BRE# 01446530

Wednesday, September 1st, 2010, 4:04 pm

It comes as no surprise today to find that there were 120,351 permanent mortgage modifications done through private-sector (Hope Now) proprietary programs in July, compared to the 36,695 through the Home Affordable Modification Program (HAMP).

What is more interesting is the rate at which these modifications are being converted.

In June, Hope Now was modifying twice as many mortgages as HAMP.

Today's numbers show that this ratio has now increased from two-to-one to three-to-one.

So what does the world of HAMP's commitment to distressed mortgages and foreclosures look like?

Brace yourself (see chart below):

I asked CoreLogic to crunch some numbers for me based on the information above. I wanted to get a scope of how many homes are in imminent default; prime candidates for a HAMP modification. This is important as some economists report that the sheer number of imminent default is reaching up to 8 million.

And in that article, analysts say they expect half of those, 4 million, will likely foreclose, doubling the current housing supply.

Judging by the CoreLogic numbers, that isn't going to happen, but we won't have HAMP to thank.

Nationally, 7.5% of prime mortgages and 27.8% of alt-As are 60+ days delinquent, in June. By way of comparison, 6.2% of prime mortgages are 90days+ delinquent, as are 26% of alt-As.

For the month of June, in Florida for example, 16% of prime mortgages are more than 60+ days delinquent, compared to nearly 46% of alt-As. At more than 90 days, that number is 15% of prime and 44% of alt-A.

For subprime, the numbers gulf is larger, but then so are the percentage of delinquencies. Nationally, 39.6% of subprime mortgages are 60+ days delinquent. That number shrinks to 35% at 90+ days delinquent.

In short, for the most part, the delinquency numbers are stagnating.

But something is still going on, or in this case, what's going on is that nothing's happening. If HAMP modifications, which can be initiated as soon as a mortgage is 30 days delinquent, were widely distributed, there would be a difference - some difference - between the above sets of numbers. In fact, if a servicer determines a borrower is at risk of imminent default - even if the homeowner is current on the mortgage and a net present value test completed - then a trial HAMP can be started.

The foreclosure rate on those homes is around 9% for prime, but nearly 30% for alt-A, and the rate of foreclosures swings among recourse and nonrecourse states.

Nonetheless, the trend of no big difference between 60+ days and 90+ days is largely consistent through the CoreLogic numbers. In most cases, regardless of the amount of delinquencies or the type of mortgage product, there is only one to two percentage points difference.

And considering HAMP makes up a dwindling fraction of the market for mortgage modifications, it is hard to recognize the full extent of the faith the U.S. government has in HAMP.

So where is the solution to all these distressed properties just sitting there? Official numbers for the Home Affordable Foreclosure Alternatives (HAFA) will be released by the U.S. Treasury in the fall.

Until then, expect more home stagnation.

Jacob Gaffney is the editor of HousingWire.

Write to him.

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John Giggy, Realtor & Foreclosure Specialist
Keller Williams Realty

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