Realty Check

Treasury On Mortgage Modifications

A little follow up to my post yesterday. I knew I'd probably upset the folks at Treasury, and I did. 

A note received late yesterday from a Treasury spokesperson:

Trial periods are now 5 months, not 3: Given this time frame, a significant number of modifications only just reached the deadline to convert.

The trial period was established to provide immediate relief while determining whether the reduced monthly payment is sustainable for borrowers, so we expect that some portion of the trial modifications will not move to permanent modifications. Redefaults occur when homeowners receive a permanent modification that they cannot sustain. Obviously, it’s too early to know what those numbers will look like.

Okay, but I have to argue a few points. 

First, the extension of the trial period is all about paperwork, not about ability to pay, so that's not at all what I'm talking about.  Supposedly, from the original documents on HAMP, if you miss a payment during the trial period, whether your paperwork is all good or not, you're out, and THAT'S what I want to know.  Yes, I get it, they don't have the conversion rate because of the delays, and I said that, but the dropout rate should be clear by now.  I don't buy that a redefault only happens when a homeowner receives a permanent modification "that they cannot sustain."  Maybe I'm not being clear.  I want the dropout rate from the trial mods!

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