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!

Now that said, I also got an email from a Citi spokesperson:

We appreciate the kudos, but for accuracy, I should point out that our redefault numbers in our 3Q foreclosure prevention data report don't include any HAMP numbers. Servicers received the HAMP guidelines from Treasury around the end of April. While we moved aggressively to implement the program as quickly as possible, we had to develop and deploy new technologies, adjust systems, hire and train customer service representatives for the new program and more. That took about a month (May), so we first began entering borrowers in HAMP trial mods around early June. The 2Q 09 default rate only includes mods that would have been 3 months delinquent by the end of June -- not enough time for any of our HAMP trial mods to have a three month default.

Point taken.

Alright my fellow housing nut jobs, I'm off Friday, so nothing from me for a while. Happy Thanksgiving to all, and I'd just like to offer my thanks to the many Realty Check readers out there. A good group of you have taken the leap into the dialogue, and the blog is better for it. Keep reading, writing, and obsessing about real estate!

Questions? Comments?