Today the Treasury Department announced a "Mortgage Modification Conversion Drive," designed to push servicers to move borrowers in the government's Home Affordable Modification Program from the initial trial phase to the permanent phase.
I blogged a bit about this last week, especially about how Treasury wouldn't tell us how many borrowers had missed payments already in the trial phase of HAMP.
I'm not going to go there again because I interviewed the housing bailout Czar today, Asst. Treasury Secretary Michael Barr and specifically asked him how many, and he replied: "Very few borrowers are missing their payments. The overwhelming majority of borrowers are making their payments on time and that's a very strong sign of success for the program."
Apparently all the trouble is in the paperwork. Depending on whom you ask, either servicers aren't processing the paperwork fast enough or borrowers aren't submitting the paperwork fast enough. The truth lies somewhere in the middle.
Banks are overwhelmed and also don't have a whole lot of incentive to move ahead. Yes, there is a small payment from the government to convert borrowers to permanent modifications, but if the borrower won't qualify, then there's no incentive to move and foreclose. Servicers (a.k.a. banks) are being paid large fees by investors, whether borrowers make their payments or not, and if they foreclose, those fees go away, not to mention they're stuck with yet another property on their books.