What Mortgage Modifications Say About the Housing Market

Bank of America quadrupled its number of permanent loan modifications in just one month, from 3,183 in mid January to 12,760 today. It also has 221,395 "active trial modifications," up from 200,287 in the January report.


"In the past month, our concerted customer outreach initiative has driven a substantial increase in the rate of conversions from trial to permanent modifications, as we anticipated in our recent reports of HAMP progress," said Jack Schakett, credit loss mitigation strategies executive for Bank of America Home Loans . "These results are attributable to the resources—including expansion of our default management staffing to more than 15,000—and focus we have placed in support of this and other homeownership retention programs."

And there you have the short version of the BofA press release sent out in anticipation of Treasury's monthly status report on its Home Affordable Modification Program (HAMP). Unfortunately the HAMP report was pushed back to tomorrow, thanks to mountains of snow still keeping federal folks from getting to work on time.

So good, right? More mods. More borrowers staying in their homes. Well, maybe. The numbers are going in the right direction, but they are a small fraction of the pile of the 5.6 million loans that are currently delinquent for some period of time. Granted, many of those are just delinquent for now, and might "cure" on their own, while others are in the pipeline for modification. But frankly, the majority of those loans are ineligible for HAMP. They may be eligible for some help from the big banks outside of HAMP, but again that's relatively few.

And that's why Treasury officials today stressed that HAMP is just one of many pieces in the Administration's effort to save the housing/mortgage market. While officials believe great progress has been made, and that the housing market is stabilizing, they admit that more can be done, and they are hinting that more will be done in the coming months. This as another pieces of the housing bailout phase out, like the Federal Reserve's MBS purchase program and the home buyer tax credit.

Treasury officials today said they are still concerned about a coming wave of foreclosures, many from pay option ARMs and many from the prime jumbo basket, particularly hard hit by unemployment. Only 2/3 of borrowers in the HAMP program are current on their payments. That's why officials now say they are looking at unemployment options and more incentives to borrowers to keep paying on trial modifications and on loans that are significantly "underwater" with respect to the property value.

Treasury will release its HAMP numbers tomorrow, listing each bank's progress and ranking them in a list of peers. But at the end of this week we will get another new delinquency report, a big one, and when we start crunching numbers, I doubt they're going to add up to significant success in housing's recovery.

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