John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... There were only 4,870 “active trial” loan modifications underway under a federal program in June in Colorado, a 24 percent drop from May. It also was the lowest number of households participating in the required trial period since the Treasury Department began releasing state-by-state data on the HAMP, or Home Affordable Modification Program.
Active trials of at least 90 days are required before lenders can determine whether borrowers facing foreclosure can have their loans permanently modified. Nationwide, 520,814 trial modifications were canceled in June. Earlier this year, the Treasury issued new guidelines to loan servicers – companies that collect monthly mortgage payments – to basically screen homeowners before accepting them into the active trial program to increase their chances of getting a permanent loan. Of the canceled trials in June, more than 60 percent had been in the program for six months or longer.
It’s not all bad news
Still, there was good news in the Colorado data.
The number of permanent modifications rose 14 percent to 5,656 in June from May. Data from June 2009 is not available.
Overall, there are 10,526 homeowners participating in the program, down 7.5 percent from the 4,960 in March, and the lowest number since the government began breaking out the state-by-state data. Still, the month-to-month decrease is about half what it was from April to May, when the total HAMP activity dropped by 14.3 percent, pointed out Shannon Peer, director of housing counseling for Brothers Redevelopment, which runs the Colorado Foreclosure Prevention Hotline, 1-87-601-4673.
The national data shows that about 45 percent of homeowners in canceled trials entered into alternative modifications. Fewer than 2 percent of those in canceled trials lost their homes in foreclosure sales. The most common causes for cancellations included incomplete documentation, missed trial payments, ore mortgage payments already less than 31 percent of the homeowner’s income.
“What we are seeing mirrors that,” Peer said. “Our HUD-certified counselors are seeing some people who had been in the trial programs go into foreclosure, but that is the worst-case scenario. It sometimes happens, but we are seeing a much larger percentage of people who get frustrated by having to continuously re-submit documentation and get frustrated. They basically feel like they have to start all over again.”
Also, a number of clients who are dropped from the trial program, find alternative programs, which increasingly are being offered by banks. “The average person facing foreclosure now is being bombarded with loan modification options and programs,” Peer said. “It is important to sit down with a HUD counselor and sort through all of their options.”
HAMP helps
Peer said he thinks the HAMP program is worthwhile, despite the high fall-out rate.
“I know the program is coming under a lot of criticism by a number of people who think the number of people it is helping is actually dropping off and it not coming close to reach its goals,” Peer said. “But I think that HAMP has sparked an increase in alternative resolutions now being offered by a lot of banks. I think HAMP is sort of the standard for banks, and attempting to go through the program can help you get into the door. It may actually be the No. 1 driver to open up communications with banks on other programs. It might not be the best solution for a lot of people, but I do think it does a lot of good.”
Mike Rosser, a lending consultant and a member of the Colorado Foreclosure Prevention Task Force and the Colorado State Housing Board, said the changing nature of why people are having trouble making their mortgage payments likely plays a role in the large number of people dropping out of the trial programs.
“The problem is that people are losing their jobs,” Rosser said. “The problem with the bad mortgages have pretty worked themselves out of the the system. If you have lost your job, a lot of times you just do not qualify for these type of programs.”
Month Active Trials Permanent Modifications Total
January 11,170 1,072 12,242
February 11,708 1,797 13,505
March 10,929 3,422 14,351
April 8,932 4,355 13,287
May 6,423 4,960 11,383
June 4,870 5,656 10,526
MSA Active Trials Permanent Modifications Total HAMP activity
Boulder 159 176 335
Colorado Springs 491 616 1,107
Denver-Aurora 2,963 3,602 6,565
Fort Collins-Loveland 220 231 451
Grand Junction 145 154 299
Greeley 315 352 667
Pueblo 135 137 272
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You always seem to be ahead of the curve, John.
A good USA today article has recently been published. It estimates some 800,000 mortgages have been modified without the assistance of the Government’s HAMP program. To give you an idea how successful it is the HAMP program is estimated to have helped 389,198 since its formation in the spring of 2009.
It will be interesting to see how the ‘distressed’ numbers look by summer’s end.