August worst month for HAMP mods

The Treasury Department's mortgage modification program had its worst month ever in August, providing permanent aid to just 33,342 homeowners.

The numbers of homeowners who have seen their Home Affordable Modification Program trial modifications converted to permanent modifications has declined every month since June. But never before has the Treasury Department converted so few trial modifications to permanent modifications in a single month.




The HAMP program is part of the Making Home Affordable prorgram, which itself is part of TARP. HAMP pays incentives to servicers who modify the loans of homeowners who are at risk of default.

Participants are initially placed in trial modifications, and in theory, if they meet the program's criteria and make their restructured payments on time, their trial modifications are made permanent after three months.

For those who do get permanent modifications, HAMP can provide relief. On average, those who get permanent mods see their monthly payments cut by about 36 percent, or $500 per month.

But the program has been marred by problems, including servicers who lose paperwork -- delaying or preventing conversions -- and homeowners who were allowed into the trial modifications without meeting eligibility requirements, prompting even more confusion.

The previous monthly low for HAMP conversions was in December 2009 -- shortly after the program was launched -- when there were about 35,000 conversions.

And every month since March, the program has removed more people from HAMP -- by cancelling their trial modifications -- then it has granted permanent status.

Treasury has justified the figures by saying that servicers are focusing on clearing their backlogs of "aged" trial modifications that have spent months in limbo without a decision being made either way as to their permanent status. Once that has done, officials say, the program will be back on track and grant more permanent modifications.

The rate of cancellations will also decline soon due to recent Treasury policies that barred people from getting trial modifications without thorough documentation of their income.



In its monthly "housing scorecard," Treasury has emphasized more positive news about the housing market in general: historically low rates on 30-year mortgages, $4 billion allocated in recent months for assistance in states hardest hit by the foreclosure crisis, and a leveling off of home prices after several years of decline.

But troubling news remains for borrowers. The number of underwater borrowers is nearly 11 milion -- up from about 10.2 million a year ago.

There were 95,400 foreclosures completed in August -- up from 92,900 the previous month and 76,100 this time a year ago.

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