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The latest data on the performance of the Home Affordable Modification Program (HAMP) show that while the Chicago region has seen large increases in permanent modifications year-over-year, growth from month to month continues to be small. The rate at which servicers are adding new permanent modifications is slow enough that many homeowners in need of help will likely not receive it before the program sunsets on December 31, 2012.
Additionally, the largest drop in active trial modifications since September 2010 was observed in September 2011. With little more than a year left in the program to make new modifications, servicers should be expanding outreach efforts to struggling homeowners and starting as many new trial modifications as possible, but the data show that the number of new modifications started continues to slow every month.
Total HAMP activity in the Chicago region grew from 41,107 to 41,897 from August to September, an increase of 1.92 percent (see figures 1 and 2). The number of Chicago region active HAMP modifications grew by 27.4 percent from September 2010 to September 2011. Permanent modifications grew by 4.3 percent from 35,742 in August 2011 to 37,276 in September 2011, which is an increase of 53.8 percent from September 2010. At the same time, trial modifications dropped by 14.4 percent from August (5,396 modifications) to September (4,621 modifications) and fell by 46.5 percent from September 2010. HAMP activity followed similar trends nationally.
As we discussed last month, large increases in program participation year-over-year are to be expected of a new program that is ramping up and is not necessarily an indication of a successful program. Indeed, the slow month-to-month growth suggests that HAMP will fall far short of its goals unless the pace of new modifications increases significantly. Treasury does not report data on the number of new modifications on a local level in its monthly scorecards, but we can draw some conclusions about the rate of new modifications locally by looking at national numbers since local trends typically track national trends closely.
In September 2011, 14,748 new trial modifications were started nationally, which is a 41 percent decrease from September 2010. New trial modifications have been steadily dropping every month this year. A new report from the Special Inspector General for TARP (SIGTARP) notes that “if the current rate continues, 520,000 to 600,000 homeowners who are eligible for HAMP will not get a permanent modification before HAMP expires”—more than half of all homeowners who are currently eligible for HAMP. The rate of trial modifications shows no sign of picking up—in fact, active trial modifications in the Chicago region dropped by 14 percent from August to September, the biggest decline since September 2010.
In its quarterly report, SIGTARP makes several recommendations to Treasury that would increase the effectiveness of the program, noting that “with just one year left for new mortgage modifications in HAMP, it is not too late for Treasury to make changes to the program and there remains much that it can do to improve.” SIGTARP’s recommendations include establishing and holding servicers accountable to clear benchmarks on the length of time it takes for trial modifications to be converted into permanent modifications, the conversion rate for trial modifications into permanent modifications, the length of time it takes for borrower complaints to be resolved, and the percentage of modification paperwork that is missing. In order to effectively hold servicers accountable, SIGTARP recommends that Treasury vigorously exercise its capacity to levy financial penalties against servicers. However, Treasury has declined to take further action on SIGTARP’s latest round of recommendations, which may limit HAMP’s ability to reach the greatest number of distressed homeowners.
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