Hope Now Sees Slower Climb in Repayment Plans

By DIANA GOLOBAYJuly 2, 2009 1:39 PM CST




HOPE NOW, the private sector alliance of mortgage servicers, non-profit counselors and investors touted 249,000 completed workout solutions for struggling borrowers in May.
The figure represents a 4% decline from April. Modifications slipped 16.3% from April while repayment plans — including refinancings — rose 6.1% in May after jumping 21.45% in April, indicating at least some slowing in the volume of refis rolling out of the pipeline.
The alliance attributed the drop in modifications and rise in repayments in May to the administration’s Making Home Affordable modification and agency refinance programs.
Under the government requirements for the Home Affordable Modification program (HAMP), loans are subject to a three month trial period before a modification can be completed. The alliance noted a number of workouts currently reported as repayment plans or trial mods may end up being modifications.
“While workouts dipped slightly in May, it is fully expected those numbers will increase as the industry and the Obama administration implement the Making Home Affordable program and as mortgage servicers continue to ramp-up to meet growing consumer needs and address the complexities of the government’s home retention efforts,” said Faith Schwartz, executive director of the alliance.
The industry initiated 32.1% more modifications among subprime borrowers than in April, while modifications among prime borrowers fell more than 13%. For every one prime mortgage foreclosure, the industry initiated 2.6 workout plans; and for every one subprime mortgage foreclosure, the industry initiated 2.61 workouts.
Foreclosure sales are still up despite the industry’s efforts, jumping 31.5% in May after rising almost 19% the month before. Foreclosure starts rose to 257,000 in May from 243,000, while completed foreclosure sales rose to 83,000 from 63,000 in April.

JP Morgan Chase (JPM: 33.77 -0.85%) announced today that it has approved 138,000 trial mortgage modifications since April 6 for homeowners on the prec

JP Morgan Chase (JPM: 33.77 -0.85%) announced today that it has approved 138,000 trial mortgage modifications since April 6 for homeowners on the precipice of foreclosure.

Processing began through President Obama’s Making Homes Affordable program, which was unveiled in April. Chase has approved 87,100 trial modifications through MHA, and 44,100 have made their first payment. But for loans that do not meet MHA’s qualifications, Chase offers another tier of modification. Chase has approved through its own program 50,900 loans, and 9,500 have made their first payment.

Of the 138,000 approved and modified loans, 53,600 have made a first payment.

“We’ve made really good progress,” said Thomas Kelly, a spokesman for Chase. “The volume has just been enormous since the program was announced, and there’s more coming in the pipeline every week.”

Through the MHA program, qualified borrowers can have their endangered mortgages reduced for principal, interest, property taxes and hazard insurance to 31% of their gross income. These modifications usually come from a reduced interest rate or an extended length of the loan.

But for those borrowers who cannot qualify for the MHA program, for reasons such as a jumbo mortgages, rental properties or unoccupied properties on the market, Chase modifies these loans under its own program.

In Chase’s modification process, the payments may be adjusted from 31% of the borrowers gross income to a range that keeps the Net Property Value at a positive, where the investor can still make a profit. The range can reach anywhere from 36-38%.

“It has taken time,” Kelly said. “Because of the volume, it has taken a large infrastructure and a lot of people to staff it.”

Both programs provide better options for both the borrower and the investor than foreclosure, Kelly said.

Chase has an additional 155,000 applications currently churning in the review process.

Serious delinquencies — mortgages 60 or more days past due and those delinquent but in bankruptcy — rose to 5%

By DIANA GOLOBAY
June 30, 2009 4:43 PM CST

Serious delinquencies — mortgages 60 or more days past due and those delinquent but in bankruptcy — rose to 5% of US residential mortgages at the end of the first quarter 2009, up almost double from the 2.7% rate seen in the year-ago period, according to a joint report by the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS).

The Q109 data show that “an overall worsening of conditions was met with a strong response in the form of increased modifications,” federal regulators said in the quarterly OCC and OTS Mortgage Metrics Report, which covers more than 34 million loans totaling $6trn in principal balances and representing 64% of all outstanding US mortgages.

“The first quarter data also showed a relatively greater increase in seriously delinquent prime mortgages compared with other risk categories and a higher number of foreclosures in process across all risk categories as a variety of moratoria on foreclosures expired during the first quarter of 2009,” the report reads.

Serious delinquencies among prime loans jumped 20% from the previous quarter to a total 2.9% of all prime mortgages. Subprime serious delinquencies, on the other hand, rose by 1.5% to a whopping 16.7% of all subprime mortgages in the porfolio.

Along with rising delinquencies comes a likely increase in foreclosure actions. The regulators found that 844,389 mortgages — or 2.5% of the total portfolio — were in the foreclosure process at quarter-end as a variety of private and agency moratoriums expired during the quarter and the recession continued to put financial strain on borrowers.

In response to this hardship, servicers stepped up modification efforts. Loan modifications initiated in the quarter reached 185,156 — rising by 55.3% from the previous quarter and 172.3% from the year-ago quarter. This data does not include the administration’s Making Home Affordable program, which took effect after the close of the quarter.

The report notes 54.1% of modifications resulted in lower monthly payments, while 29.3% of modifications reduced payments by 20% or more. At the same time, modifications that resulted in higher payments slipped to 18.5% from 25% the previous quarter.

Six months after modification in Q408, only 24% of the mortgages that had monthly payments reduced by 20% or more were 60 or more days past due, compared with 54% of mortgages with monthly payments left unchanged, and 50% with higher monthly payments.

“Those modifications implemented in the fourth quarter of 2008 have re-defaulted at a slightly lower rate than the preceding quarter,” the report’s authors note. “However, it is too early to determine whether the data for the fourth quarter portend a sustained improvement in performance resulting from recent changes to modification practices.