The August housing scorecard is out, and as Arthur Delaney notes it contains a dubious milestone. Over 1 million homeowners have now been kicked out of the HAMP program, either by being turned down for a permanent modification or going into a re-default on their modification once it became permanent. And all 1 million of those borrowers end up in a worse financial situation than when they started out with the program, trapped by their servicer into bad scenarios.
The Treasury Department said Thursday that 825,478 homeowners remain in permanent modifications and 66,785 are in trials as of July. But 234,760 permanent modifications and 770,834 trial ones have been canceled since HAMP’s launch in 2009, for a total of 1,005,594 cancellations.
Most of the failed trial modifications were canceled prior to June 2010, when the Treasury Department required banks to verify borrowers’ income in order to declare them eligible for the program. Dozens of people who applied for modifications had told HuffPost and other publications that their banks strung them along for months, only to tell them that they didn’t qualify for modifications after all. In some cases, borrowers said HAMP caused the foreclosure it was supposed to prevent.
The sadder part of this is that the Treasury Department routinely counts the 234,760 permanent modifications that were eventually canceled as “people helped” by the program. Sometimes they get really brazen and count those in the canceled trial mods as well. But if you asked a Treasury Department official with knowledge of HAMP today, they would tell you that over 1 million borrowers have received permanent modifications from the program. In fact, it says that on page one of the HUD Housing Scorecard for August: “more than one million homeowners have received a permanent modification.” They won’t mention the nearly quarter of a million who redefaulted. You could stretch and claim that the redefault wasn’t anticipated, and that the mod should still count. But clearly, that borrower needed more help than the inadequate mod provided. So they got bounced. A modification program with a 23% redefault rate isn’t a very good modification program.
Incidentally, HAMP trial modifications are just trickling in. The latest data, from July, showed just 14,100 sign-ups, down from 16,300 the previous month. The signature foreclosure mitigation program is active until the end of 2013, but it’s attracting few borrowers at this point. You would think that more would join up, because banks can use the HAMP Principal Reduction Alternative to basically double up their incentives, reaping the benefits from HAMP and gaining credits under the foreclosure fraud settlement. So far that has not materialized.
In a sign that Treasury knows HAMP failed, they now like to emphasize that it set “industry standards” for loan modifications. They like to pull out this chart showing that modifications outpaced foreclosures since April 2009, if you take into account private modifications (which are typically of terrible quality and often INCREASE the monthly payment, so they don’t count the redefaults there either). The fact that HAMP didn’t generate many modifications on its own doesn’t seem to concern them. Of course not; the point was to foam the runway for the banks.