How is the whole loan modification thing going?

Unless you have spent the last 24 hours under a rock, you already know that on Monday, before coming out to shake down Hollywood for re-election money, President Obama released the latest version of “Washington Helps Homeowners in Trouble”.  Those changes will be discussed in a separate article. The more basic question is how the whole loan modification program is going at the national level. The Treasury Department collects the figures and releases them, but you would have a hard time finding them anywhere in the national media. An organization called Pro Publica has gone out and done what journalists no longer do, their homework. They pulled together the statistics on the Government’s loan modification program and came up with the figures in the table below. We went ahead and added an additional figure that Pro Publica did not; the loan modification “failure rate.” That’s the percentage of loan modifications which have been cancelled against the total number of loan modifications reported. In the failure rate analysis, we did not address the loan modifications “in trial” or “aged trials” since the outcome of these two groups are unknown. Some explanation is in order. These are HAMP loan modifications, a government program. The numbers don’t appear to reflect the number of non-HAMP loan modifications which have been attempted or granted; this data is not collected by the feds. It is collected by private organizations such as Lender Processing Services, but the data is proprietary and is reported only as the number of pre-foreclosure filings. Under HAMP, the homeowner must submit the now famous stack of stuff, which is then lost at least four times by the servicer. When the homeowner or the agent for the homeowner displays the temerity and persistence to keep resubmitting the stack of stuff, a temporary loan modification for three months may be granted. If the modified payments are made for those three months, the homeowner becomes eligible for a permanent modification. In this table “in trial” means the loan is within the initial 3 month period. “Aged” trial means the loan is still in temporary loan modification status outside of the three month window. The table picks up these files at the six month mark. Aged trials are not unusual. Some of these “temporary” loan modifications last more than a year before being cancelled or granted. “Canceled trials” means the loan modification was killed at the temporary stage. “Permanent Mods” means that there was a material change to the terms and conditions of the loan; there are no details on the individual files. “Canceled mods” means permanent loan modifications that were cancelled after being granted.       Here are the numbers: Name               Started       In Trial  Aged Trial  Cancelled Trial  Permanent Mod  Cancelled Mod Overall            1,639,282  92,051    23,014      760,796              657,044               106,027 BofA                401,251     26,530      9,350         217,120              127,355               20,856 Chase               256,560     17,223      3,485         128,010                 89,231               18,611 Wells Fargo     234,666      11,996     1,476         118,006                  91,392              11,796 Citibank           130,347       3,436      1,791         72,287                 46,634                6,199 One West        53,699       3,737          236           20,773                 26,006                 2,917 AHMSI            33,588        2,224          538           4,598                  22,585                3,643 Failure Rates: Overall:           53% BofA               59% Chase             57% Wells Fargo    55% Citibank         60% One West       44% AHMSI           25% Notes:  1.  This table does not include all HAMP servicers; only the major players. 2. Bank of America numbers include Countrywide loans. One West and AHMSI were included for two reasons. First, OneWest has a nasty reputation of being terrible to deal with since Uncle Sugar Daddy basically indemnified them for losses when they took over IndyMac Bank; so the fact they are below 50% for their failure rate was a nice surprise. AHMSI is included because it filed for bankruptcy in 2007 and was purchased last year by Wilbur Ross & Co., a hedge fund known for corporate turnarounds. Their figures give you some insight on what is possible in loan modifications when a diligent effort is made. The depressing point of the loan modification program is that the failure rate of the too big to fail bank mortgage departments runs between 55 and 60%;  not encouraging at all. This is especially a problem when an “aged trial” loan is rejected for a permanent modification; by then the homeowner will have made a year or more of payments only to be denied for a permanent modification and again face foreclosure.