OverviewThe government program established to assist homeowners in distress continues to lose steam. The Home Affordable Modification Program, known as Making Home Affordable Program, continues to lose steam. The monthly report for May 2010 provides sobering statistics.
- Number of permanent loan modifications: 346,816.
- Number of trial modifications canceled: 429,696.
- Number of "active trials": 467,672.
The trial portion of the loan modification process is taking far longer than the three-month period it is designed to last. It appears that, more often than not, borrowers aren't surviving the trial modification stage.
- Number of trial modifications started over the last eight months: 690,616. (As of May, there were 1,244,184 trials started, and as of last September there were 553,568. That gives 690,616 trials started over the last 8 months.)
In effect, the May Report shows the number of failed loan modifications trials is significantly greater than the number of successful ones.
Furthermore, a month-over-month comparative analysis indicates that the number of "All Trials Started" is decreasing steadily, along with the number of "All Permanent Modifications Started."
For example, trials started in April over March were 47,160, and trials started in May over April were 30,099 - which is the slowest pace since the commencement of the HAMP program.
Debt to Income
The median front-end DTI before modification is 44.8% (which
has remained in this range for several months), and the back-end DTI before
modification is 79.8% (which has been in the range of 77.5% to 80.2% for several
months). The back-end DTI discloses an inescapable fact: nearly 80% of the
borrower's income is going to servicing debt - and nearly 64% of income even
after loan modification.
It's no wonder that many borrowers never make it out of trial
modification into permanent modification. Indeed, these are "median"
characteristics - so many borrowers have even higher risk profiles!
On what basis can success be claimed for this program?
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Making Home Affordable Program
Servicer Report May 2010 (06/21/10)