Source : Housing Wire
Bank of America (BAC: 13.48 0.00%) recently sampled 100 mortgages reaching 60 days or more delinquent, and found that only 14 of them qualify for a permanent modification through HAMP.
The Home Affordable Modification Program came under fire at the end of February from lawmakers claiming it has caused more harm than good. Even those defending the program say it will not reach as many borrowers as originally thought. The House Financial Services Committee will debate a bill aimed at terminating the program two years before it set to expire.
Through January, participating mortgage servicers permanently modified roughly 600,000 loans, far short of the 3 million to 4 million estimated by the Treasury Department when HAMP launched in March 2009.
BofA monitored the 100 loans as they went through the HAMP waterfall. In the first phase, 28 loans fell out of the program because the bank could not get in touch with the borrower, according to a presentation for investors held Tuesday.
"We conduct extensive outreach activity to these including 110 phone calls and eight customized letters," BofA Executive Vice President Terry Laughlin said, "in addition to door-knocking in hard hit markets and hundreds of outreach events across the country."
Of the 72 borrowers that did provide financials to BofA, 52 did not pass the HAMP underwriting guidelines. Roughly half of those that did not pass already had mortgage payments at or below 31% of their monthly income. Another 23% did not have enough monthly income to qualify, and 17% did not submit their hard ship documentation.
Then, of the 20 that made to a trial stage, 14 completed the trial process by making three consecutive mortgage payments under the new terms.
Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program, and other HAMP watchdogs have criticized Treasury for not holding servicers accountable for getting more loans moving through the program.
"HAMPís failure to meet its original expectations has many causes, starting with a rushed launch based on inadequate analysis, an insufficient incentive structure, and without fully developed rules, which has required frequent changes to program guidelines," Barofsky said before a House committee in March.
Laughlin was put in charge of the new mortgage servicing division at BofA responsible for legacy and delinquent mortgages. The department will continue developing loss mitigation programs to help more borrowers avoid foreclosure, but not everyone will be able to keep their home, he said.
"We've reached the crossed roads," Laughlin said. "Despite the loan modification programs, our best efforts, and our industry's best efforts, foreclosure will be unavoidable going forward."