Only 169 homeowners in Colorado moved into the permanent modification portion of the Home Affordable Modification Program, according to a report released today by the government. Last year, an average of 242 homeowners entered the program each month in Colorado. December was the first time fewer than 200 people had entered the permanent modification program.

On the other hand, the number of people entering the program rose by 10 to 1,005 from 995 in November. While a small number, typically the number of people entering the program drops each month. The Treasury Department has instructed loan servicers to pre-quality people, as initially a large number of distressed homeowners were accepted into HAMP, but were not accepted into the permanent modification portion of the program. Now, the vast majority of the people who begin the program remain in it.

Shannon Peer, housing counselor manager at the non-profit Brothers Redevelopment, wasn’t overly concerned about the drop in the permanent modification. First, it since it is only one month it could be an anomaly, he noted. In addition, he pointed out that sometimes the Treasury Department later revises the numbers, so it is possible that December numbers will end up being more in line with the average.

“Certainly, this will be a number we will keep our eye on,” Peer said. And while the number of people entering the program rose slightly, it is moving in the right direction.

“This is the first time in many months that we have seen any upward movement,” Peer said. “And at some point in Colorado, as people are getting back on their feet financially, we might start seeing more people qualify for the program.”

Initially, the Obama Administration hoped to help three million to four million people with HAMP. So far, about 930,000 people across the country are in the permanent modification plan, far short of the original projections. Just days ago, President Obama said that he would be the “first to admit” the previous programs by his administration “didn’t help as many folks as we’d hoped.”

Still, HAMP has saved people in the permanent modification part of the program about $10.5 billion in reduced mortgage payments. “A lot of people say it cost too much money, and it has been a boondoggle, but they only spent a fraction that was allocated to it,” Peer said. “I think that all of these programs chip away at the problem in different ways. It is good to have a suite of choices to address the problem.”

A few days ago, Obama urged the public to pressure Congress to adopt legislation that would make it easier for borrowers to refinance into historically low mortgage rates. That legislation is anticipated to cost $5 billion to $10 billion in new fees on banks, would help an estimated 3.5 million people. It would require the Federal Housing Administration assume the risk on the loan.

Meanwhile, banks are reportedly close to reaching a settlement with the government for improper loan servicing, which could result in principal reductions for some borrowers. Another program, called the Home Affordable Refinance Mortgage, or HARP, makes it easier to refinance a loan that already is guaranteed by Fannie Mae or Freddie Mac.

Details crucial

Details of what has been dubbed HARP 2.0 are expected to be released shortly.

Peter Lansing, president of Universal Lending, said the devil is in the details. Universal Lending is a sponsor of InsideRealEstateNews.

“Mortgage lenders and real estate agents want to get down to what that means to us and our customers right now,” Lansing said. “We need to know what this will mean for specific borrowers and homeowners. We need to know the nitty-gritty of it. We listened to what the President said in his State of the Union address and were very attentive, but now we need to know how it is going to work.”

He also said that every program, even if the intentions are good, can have unintended consequences.

“It’s like you have a big fire and you throw a bunch of water on it. Sometimes you will put out the fire and be left with a lot of water damage.”

Month	Active Trials	Permanent Modifications
January 2010	11,708	1,797
February	11,707	2,613
March	10,929	3,422
April	8,932	4,355
May	6,423	4,960
June	4,870	5,147
July	3,329	6,124
August	2,555	6,469
September	2,216	6,660
October	2,002	6,885
November	1,853	7,134
December	1,876	7,369
January 2011	1,762	7,587
February	1,658	7,827
March	1,597	8,222
April	1,619	8,464
May	1,520	8,801
June	1,378	9,093
July	1,274	9,364
August	1,257	9,581
September	1,121	9,917
October	1,065	10,104
November	995	10,324
December	1,005	10,493

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At the end of September, there were 9,917 people in the “permanent modification” Home Affordable Modification Program , better known as HAMP.

“We will surpass 10,000 in October,” said Shannon Peer, Director of Housing Counseling at Brothers Redevelopment, the non-profit group that manages the Colorado Foreclosure Hotline and provides free counseling to distressed homeowners in the state. In fact, it may already have happened. “It’s just a matter of counting them and recording the numbers at this point,” he said.

It’s a milestone to cross the 10,000 threshold, he said.

Equivalent of 25% of foreclosures at peak year

“That’s a huge number,” Peer said. “At the peak of the foreclosure crisis in 2009, we were adding about 40,000 foreclosures, so this represents a big percentage of people losing their homes. It is extremely significant to have helped more than 10,000 people to keep their homes.”

From September, 336 people entered the permanent modification program from the required first step, known as the active trial, a bigger than normal month-to-month increase. HAMP typically reduces mortgage rates to even below today’s historically low levels.

“We’ve been seeing an average of 245 to 250 each month,” Peer said

And while the numbers of homeowners entering the program continues to drop slightly to a new low  - 1,121 in September compared with 1,257 in August – that has been the pattern and was expected, Peer said. The U.S. Treasury Department has told loan servicers to pre-screen candidates so they are likely to be accepted into the permanent program. The Treasury Office of the Comptroller reported that HAMP modifications “continue to exhibit lower delinquency and re-default rates.”

Fewer seeking help may be sign economy is stabilizing

A downward trend in people entering the program could be a sign that the Colorado economy is starting to stabilize, Peer said.

HAMP, and it’s sister program, HARP – the Home Affordable Refinance Program – also should stimulate the economy, as people in them will be spending less on their mortgages, giving them more money to spend elsewhere, Peer noted.

So far, nationally, homeowners in HAMP’s permanent modification program have saved an estimated $8.8 billion in mortgage payments. The median monthly savings is $526, more than one third of the median before-modification payment.

HARP, by contrast, is for people with Fannie Mae and Freddie Mac loans who are current on all of their payments. President Obama recently announced that the underwriting guidelines will be eased to allow many people who are under water on their loans – that is, the loan is worth more than the home – can refinance under HARP.

Some observers have criticized HAMP and HARP because they are only reaching a fraction of the people that the Obama Administration initially expected to be helped by them.

But Peer said that both programs not only are helping thousands of people in Colorado, but they are boosting the economy.

“As we know, no single program is going to solve the foreclosure problem or be the right answer for everyone,” Peer said. “HARP should provide more economic stimulus as more people have discretionary income. I would anticipate that the more people are helped by these program it will help us get out of this downturn and we will start to see more of an upswing in our economy.”

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Contact John Rebchook at JRCHOOK@gmail.com

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The much-maligned HAMP program is not a silver bullet, but has several silver linings that are often overlooked, according to two affordable housing experts.

The number of Colorado homeowners in the permanent modification stage of the Obama Administration’s flagship program to keep Americans from losing their homes in foreclosure has grown by 48 percent in August from August 2011, shows a report released today.

At the end of August there were 9,581 homeowners in the permanent modification portion of the Home Affordable Modification Program, better known as HAMP. In August 2010, there were 6,469 homeowners in the final stage of HAMP.

From July to August, 217 Colorado homeowners entered the program, which can lower mortgage rates for distressed borrowers to as low as 2 percent.

However, the number of people entering HAMP in August fell to a new monthly low of 1,257

A number of politicians and those in the real estate industry have called HAMP a failure. Nationally, only 816,000 homeowners are in the permanent modification program, far below the Obama Administration’s goal of 3 million to 4 million. HAMP kicked off in March 2009 as a $75 billion program, although now it is expected to cost a fraction of that. Estimates are that each permanent modification costs taxpayers $20,000, which equates, so far,  to about $1.6 billion on a national basis.

Saving substantial

For those accepted into the permanent program, the benefits can be great. The median monthly savings for someone enrolled in the permanent modification is $525. Aggregate savings in mortgage savings, to date,  is approaching $8.3 billion. Colorado’s share of that would be about $116 million.

And cutting mortgage payments by $525 a month would equate to a $60.36 million annual reduction in loan payments in Colorado.

$8 billion – real money

“Leave it to the government to show an $8 billion savings as seen as not a good thing,” said Zachary Urban, director of Housing Counseling at the Adams County Housing Authority.

“I think that is fantastic,” Urban said. “To me, $8 billion is a ton of money. That is additional money the consumer has to spend and will flow into the economy.”

Urban said the expectations for HAMP were too great.

“I think HAMP’s biggest downfall is the hype it got in the beginning,” Urban said. “If you read the Treasury report and other reports critical of HAMP, the biggest problem was that at the beginning it was claimed to be a silver bullet. I have always said there is no silver bullet. Every foreclosure is a one-off event and no one program will not keep every homeowner out of foreclosure.”

However, he pointed to a number of silver linings to HAMP:

• Homes kept out of foreclosure are “performing assets” for lenders, while foreclosures inevitably lead to big losses for banks.
• Each home that is saved from foreclosure helps to preserve the value of nearby homes in the neighborhood. “So whether neighbors realize it or not, HAMP is helping them,” by not dragging down their home values even more, Urban said.
• HAMP has opened the lines of communications between distressed borrowers and lenders.

“You’ll never read an article about this, but one benefit of HAMP is simple communications,” Urban said. “Back in 2004 and 2005, the largest issue was the lenders could not find the people they wanted to help. Now, with HAMP, increasingly borrowers are reaching out to banks. I think that banks now are being very careful to make the foreclosure the last option,” he said, especially in light of the problems the industry has had such as the robo-signing of foreclosure documents.

Shannon Peer, of Brother Redevelopment, the agency that runs the Colorado Foreclosure Hotline, noted that about 250 people on average had been joining the permanent modification portion of HAMP each month.

“But with a smaller pool of those entering the active trial portion, I think we should probably expect that number will continue to go down,” he said.

Unemployment driving foreclosure force

And a fundamental problem with HAMP was that it was designed when many people were saddled with high-interest, subprime loans, most of which have since worked their way through the system.

“Now, of course, the main reason most people are facing the prospect of a foreclosure is because they are unemployed or under-employed,” Peer said. “We have had some clients who found jobs, and have since lost those jobs, and are unemployed again. For people who are struggling to find a job, a lower mortgage rate is not a permanent fix. Unfortunately, the employment picture does not appear to be getting much brighter for many people.”

While HAMP can lower mortgage payments to as low as 2 percent, few are getting that rate. And if they do, it is for only a short period of time, before it bumps up.

“2 percent is kind of the Holy Grail,” Urban said.

And while market rates on a 30-year fixed loan are hovering around 4 percent, no one  who is considering HAMP will qualify for those rates, which are reserved for borrowers with the best credit and equity in their homes.

But not getting the lowest rate possible should not be the goal, Peer noted.

“What got us into this problem were people who were trying to get the lowest rate possible,” Peer said. “People may not quality for HAMP, but they might be able to get into a proprietary forbearance program from a bank that lowers their monthly mortgage to 31 percent of their income. That might be 4.5 percent, not 2 percent.”

And even though market rates might be lower today, Peer agreed with Urban that is not in the cards for potential HAMP clients.

“They’re not going to quality for those rates today and they’re not going to qualify for the best market rates tomorrow, whatever they are at,” he said. “But the goal is not to get them the lowest rate possible. The goal is to get them the best rate that will allow them to keep their house and stay out of foreclosure.”

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Only 1,274 Colorado homeowners were in the required “Active Trials” portion of the HAMP – Home Affordable Modification Program – in July, 7.5 percent below the previous low set in June. Meanwhile, 9,364 people were accepted into the permanent modification program in July, 271 more than in June.

Nationally, there are 675,447 homeowners in the permanent modification program, far below the 2 million to 3 million homeowners the Obama Administration initially hoped to help. The foreclosure problem has been vexing, because the root cause for people losing their homes has changed to people losing their jobs, from the initial cause of mortgages that were too high. Since June, 22,079 homeowners across the country entered the trial modification part of HAMP.

Servicer pressure

“While tens of thousands of additional homeowners benefit from the Administration’s programs each month, we need to keep the pressure on servicers to effectively assist those homeowners who are still struggling and eligible for assistance,” said Treasury Assistant Secretary for Financial Stability Tim Massad. “These assessments provide an unprecedented level of information about servicer performance and are designed to help more eligible homeowners walk away from this process with better results.”

“The Obama Administration is dedicated to helping homeowners who were negatively affected by the housing crisis and this month’s scorecard shows signs of these programs working,” said HUD Assistant Secretary Raphael Bostic. “Data shows improvements in home prices, which have increased three months in a row, and a reduction in foreclosure starts and completions, which have been trending downward since fall 2010. Although the data suggests improvement, we are still continuing to work with homeowners, lenders, servicers, and others so that this positive trend continues. ”

As the Administration continues to take steps to prompt servicers to provide more effective assistance to struggling homeowners through its foreclosure prevention programs, the continued fragility of the housing market demonstrates the need for the Administration’s recovery efforts in hard hit communities.

More options

Administration efforts have helped improve servicer performance in assisting struggling homeowners. While more progress needs to be made, servicers have been focusing attention on areas of need identified through regular compliance and program reviews, with results published in the Administration’s quarterly Servicer Assessments. Since inception of the voluntary Making Home Affordable Program, Treasury has required participating servicers to take specific actions to improve their servicing processes to more effectively assist struggling homeowners. As a result, there are more options for assistance available to struggling homeowners today than have ever been available before.

The Administration’s efforts have helped millions of families deal with the worst economic crisis since the Great Depression. More than 5 million mortgage aid arrangements were started between April 2009 and the end of July 2011. While some homeowners may have received help from more than one program, the total number of aid offers is more than double the number of foreclosure completions for the same period (2.2 million). In July, more than 28,000 additional homeowners received a permanent modification through the Administration’s Home Affordable Modification Program (HAMP); more than 790,000 homeowners across the country have now received a HAMP permanent modification with a median payment reduction of 37 percent. To date, homeowners in permanent modifications have realized aggregate savings in monthly mortgage payments of nearly $7.8 billion.

Housing market remains fragile as data through July paint a mixed picture of recovery. Home prices as reported by S&P/Case-Shiller and FHFA were up for the third consecutive month in July after several previous months of decline. Foreclosure starts and completions continued a downward trend, as mortgage aid programs are helping homeowners, although some of the decline remains due to lender processing issues delaying some foreclosure actions. The fragility of the market is underscored by the fact mortgage delinquencies rose slightly in July.

The Servicer Assessments summarize performance for the 10 largest Making Home Affordable participating servicers from reviews largely conducted throughout the second quarter of 2011 on three categories of program implementation: identifying and contacting homeowners; homeowner evaluation and assistance; and program reporting, management and governance. Although some improvements have been made, based on the reviews for this quarter, Bank of America, NA and J.P. Morgan Chase Bank, NA remain in need of substantial improvement. Both servicers were subject to withholding of financial incentives under the program based on results from the first quarter and will continue to have their incentives withheld until their performance improves.

While Ocwen Loan Servicing, LLC and Wells Fargo Bank, NA were both found to be in need of substantial improvement in the first quarter of 2011, compliance activities conducted to follow up on their progress and assess other areas of program implementation found that both mortgage servicers have corrected identified deficiencies from the first quarter. Both servicers were found to be in need of moderate improvement in the second quarter.

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In June, only 1,378 home owners were accepted into the required active trials portion of the Home Affordable Modification Program, according to a government report released today. That is the lowest number of people accepted into the program since the program began. It’s about a 9 percent drop from the 1,520 people accepted into the program in May. It’s also 13.3 percent lower than the average number of people accepted into HAMP in Colorado in the first six months of this year. In the first half of the year, 9,534 were accepted into the program, which seeks to help people stay in their homes primarily by dramatically reducing their mortgage rates.

However, on the other side of the coin, some 1,670 homeowners were accepted into the permanent modification program, by far the largest in any single month. At the half-year point, there were 10,471 people in the permanent modification program, a 19 percent increase from the 8,801 in the permanent program in May. Typically, the month-t0-month increases have been around 4 percent.

Nationally, more homeowners in the first stage are converting to the permanent stage, the government reported today. Of homeowners eligible to convert, 74 percent were granted permanent modifications since June 2010. And it is taking an average of 3.5 months to convert, marking higher conversion rates and shorter time frames than earlier in the  program. Nationally, 763,071 permanent modifications have been started and 760,796 trial modifications have been canceled. There are 657,044 active permanent modifications in the country. The Obama Administration initially had high hopes for HAMP, believing it could keep 2 million to 3 million people in their homes.

Homeowners receiving permanent modifications save a median of $524 each month, or 37 percent of the median before-modification payment. That translates into an aggregate of $7.3 billion in savings.

Still, Ron Woodcock, a broker with RE/MAX Southeast, believes the government should scrap all of these loan modification programs, including a sister program to HAMP – HAFA, or Home Affordable Foreclosure Alternative program.

“That is good news,” that a record number of people in Colorado have entered the permanent part of HAMP, Woodcock said. “I’m thinking it should be scrapped, based on what it cost and the minimal number of people it has helped nationwide. I think what people have forgotten, is that programs like HAMP were created by the government. But banks have always done loan modifications on their own, when they thought a person could remain on their house. Banks have always done short sales. This is nothing new.” A short sale is when the bank accepts less than the mortgage amount.

Two of Woodcock clients sought help from HAFA, and instead lost their homes to foreclosure. “HAFA led to more confusion and clouded the issue with the banks,” Woodcock said. “I could have done a short sale if not for HAFA,” which would have been better for the home seller and the bank, he said.

“I would have the government step aside and let private banks modify loans on their own, if the determine the person could keep their house,” by participating in a program.

Indeed, he said that government never should have gotten involved in bailing out lenders in the first place. If they hadn’t been given a life-line by the government, they would have been forced “to come up with their own solutions to the mortgage crisis if they were going to stay in business. I believe because of the federal government’s involvement it will only take us longer to bottom out and will delay our recovery time. I originally had high hopes for these programs, but if you look at the national stats they were anything but a success and may have caused more harm than good.”

He said the government did a better job of dealing with the savings and loans crash of the 1980s.”There was minimal government intervention compared to today and the market recovered just fine,” Woodcock said.

Others, however, argue that the government’s involvement is an important first step. Banks typically require distressed homeowners to first attempt to receive a government modification, before they offer they offer help.

Contact John Rebchook at JRCHOOK@gmail.com

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Only 1,520 Colorado homeowners entered the required “active trial” portion of the Obama Administration’s centerpiece program for reducing foreclosures in May, the lowest tally for any month since the government began releasing figures, according to data released today.

The Home Affordable Mortgage Program, or HAMP, which earmarked as much as $75 billion to help distressed homeowners, was launched in March 2009, but the U.S. Treasury Department did not break out state-by-state data until late 2009.

Still, it is unlikely that there ever was a month once the program got going than fewer than 1,520 homeowners in Colorado entered the program, which provides extremely low mortgage rates to qualified homeowners to keep them in their homes. The program was created when many were still reeling from subprime mortgage rates that were skyrocketing and needed debt relief to keep their homes.

Bad loans not the culprit anymore

“I would say that 99.9 percent of those bad loans have worked their way through the system,” said Ron Woodcock, a broker with RE/MAX Southeast. “The problem now is unemployment. You could a lower a rate to zero percent and it won’t help if you don’t have a job or money. If you lower someone’s monthly payment to $900 from $1,700, it won’t work if their only income is $900 a month in unemployment benefits.”

Woodcock has been a long-time critic of HAMP and its sister program, HAFA, the Home Affordable Foreclosure Alternative. HAFA offers incentives to homeowners looking to exit their homes through a short sale or a deed-in-lieu of foreclosures. A short sale is when the lender accepts less than the mortgage amount. So far, 17,781 HAFA agreements have been started, 7,652 are active and 8,541 have been completed nationwide. Of those, 8,309 were short sales and 232 were deeds-in-lieu of foreclosure.

By contrast, 1.6 million HAMP trials have been started, although 756,521 trial modifications have been cancelled since the program began. Currently, there are 633,459 active permanent modifications in the U.S.

337 Colorado homeowners helped in May

In Colorado, there were 8,801 homeowners with permanent modifications at the end of May, 337 more than the 8,464 in April, a 4 percent month-to-month increase. The number of people entering the active trials dropped by 6.1 percent from April.

In May 2010, some 6,423 Colorado homeowners entered HAMP. However, that was before the Treasury Department changed the guidelines and started requiring that loan servicers pre-qualifiy people for the initial stage of the program. The problem plaguing the program in its first year or so was that a large percentage of the people that were accepted into the trial program were not being accepted into the permanent modification portion of HAMP. That has turned around. Since June 1, 2010, 71 percent of the people enrolled in trial modifications were granted permanent modifications. On average, it took 3.5 months to go from one program to the other

So far, homeowners receiving permanent modifications have realized aggregate savings in monthly mortgage payments of more than $6.8 billion.

Woodcock, however, is not impressed.

“I just think HAMP throws a wrench into the whole thing,” he said. “I think just as many people, if not more people, would have been helped if the government had just stepped aside and let the private market deal with it.”

Foreclosures rising

Woodcock said he has noticed an increase in foreclosure filings in the past week or two. If that continues, it will reverse a trend of declining foreclosures in Colorado and the Denver area.

“I think we’re going to see another wave of foreclosures,” Woodcock said. “It may not be as big as the first wave, but it will be big. I recently spoke to two bankruptcy attorneys, and they are looking at different data than me, and they concurred. I think there’s just a huge inventory of foreclosures that aren’t being processed by the banks and are just sitting there. It’s a huge shadow market. And these mortgage modification programs are not going to put the brakes on this.”

Woodcock said one problem is that many people who hitch their home’s fate to these government programs lose valuable time and often are forced into a foreclosure. Proponents of HAMP, however, note that an increasingly large number of people turned down by the program are then enrolled into propriatary program offered by banks. But the programs typically require borrowers first to try to get help through a government program.

Woodcock said that he recently received a 30-page “memo” on updates to Fannie Mae rules. Although it’s a lot to wade through, Woodcock said the summary states that Fannie Mae is “speeding up” the short-sale process. However, he said quite the opposite is happening. He said that he recently had a home under contract for a short sale and Bank of America, the loan servicer, had accepted it. Fannie Mae, however, was the investor and refused to delay the foreclosure sale to accommodate the short sale, because postponing it would have violated its new guidelines, he said.

“The idea that Fannie Mae is speeding up short sales is BS,” Woodcock said. “I think all of these programs and new guidelines are just creating more confusion and more delays. They’re not helping. They’re making matters worse.”

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Colorado in April showed the first month-over-month increase this year in the number of homeowners entering the required first step of the Home Affordable Modification Program. While it marks one of the few positive moves, it was only an increase of 22 homeowners from March to April entering the program, shows data released last Thursday.

242 Colorado homeowners helped in April

In April, some 1,619 Colorado homeowners entered the permanent modifications portion of the $75 billion HAMP. While that is a mere 1.4 percent increase from the 1,597 people who entered the program in March, it does buck a trend. Last year, only one month -December – showed an increase from the previous month, and the 1.2 percent increase from November was even more modest than the change from March to April. In April 2010, 8,932 Colorado homeowners were accepted into the program. However, that was before the U.S. Treasury instructed servicers to pre-qualify people before accepting them into the first-stage of HAMP, because so many of them were not being accepted into the permanent modification program. For many homeowners that was devastating because they had been pinning their hopes on the program for months and were in a worse financial situation than when they began. However, since June 2010, when the applicants were starting to be pre-screened, 70 percent of the trial modifications have been converted to permanent modifications.

In Colorado, 8,464 people entered the permanent modification portion of HAMP in April, compared with 8,222 in March. In other words, 242 Colorado homeowners in April were deemed qualified to have their mortgage rates lowered enough that it is expected to allow them to stay out of foreclosure.

Nationally, almost 700,00 homeowners have received permanent modifications, saving them more than $6.3 billion, since the program began in 2009. However, that is far short of the 3 million to 4 million the Obama Administration had hoped to help with HAMP. On the other hand, only a fraction of the $75 billion has been allocated to HAMP. Across the country, borrowers whose loans have been modified save a median of $526 each month, or 37 percent of their before-modification monthly housing payment.

The Obama Administration is turning up the heat on servicers – those responsible for collecting monthly mortgage payments, as well as determining which homeowners are accepted into HAMP. Starting in April, the Treasury is publishing quarterly assessments of the 10 largest program participants. For the first quarter of 2011, four servicers were deemed to need “substantial improvement” by the Treasury. The Treasury is withholding financial incentives from three servicers.

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In the first quarter of 2010, 34,336 Colorado homeowners were pinning their hopes on keeping their homes out of foreclosure through the Obama Administration’s flagship program to help people keep their homes.

In the first quarter of 2011, only 5,017 Colorado homeowners were in the required “Active Trials” portion of the Home Affordable Modification program, better known as HAMP, according to an InsideRealEstateNews analysis of data released today.

That’s a 85.4 percent drop.

Much of the big reduction is by design.

In mid-2010, the Treasury Department advised servicers to pre-screen homeowners entering the program, because such a large percentage of them were not qualifying for permanent modifications, which can lower mortgage rates to as low as 2 percent.

Nationally, borrowers in the permanent program have saved $5.9 billion in lower mortgage payments. Savings by Colorado homeowners equates to an estimated $82.6 million, according to an InsideRealEstateNews calculation.

In March, a record-low 1,597 homeowners in Colorado entered the active trial, a 3.7 percent drop from the previous low in February. However, a record 8,222 homeowners are in the permanent modification program, an increase of  395 people from February.

“Fantastic news”

“That is fantastic news,” said Shannon Peer, Housing Counseling director at Brothers Redevelopment, which is in charge of the Colorado Foreclosure, 1-877-601-HOPE.

Although some politicians and real estate officials have been calling for the elimination of HAMP, or a major overhaul of the program, Peer is not in that camp.

“Especially not with what we are seeing with March numbers,” Peer said. “Helping 400 people keep their homes is incredible. We’ve been noticing that during the last six or eight months, typically the number of people entering the permanent part of the program has been consistently in the 235 to 250 range, so this is a pretty big jump.”

Banks increasingly helping

Beyond that, counselors at Brothers Redevelopment have been noticing that many people turned down by HAMP, have seamlessly been moved into proprietary programs offered by the banks.

“That was always supposed to happen, but the reality was that it was not always the case in the past,” Peer said. “I think the servicers are more efficient in moving people into proprietary programs than they have been in the past.”

The huge drop of people entering the program from a year ago does not bother Peer.

“We anticipated a big drop in the number of people in the active trials,” Peer said. “Now, if you are accepted into the trial period, there is a very strong correlation that you will be accepted into the permanent program.”

Unemployment the culprit

Also, HAMP originally was designed to help people with extremely high mortgage rates that they couldn’t afford.

“Now, of course, the problem is with people who are unemployed or under-employed,” Peer said. “We’re seeing a big increase in servicers moving people into forbearance programs, which buys them time. Many people who are facing losing their homes do eventually find work, and can start making payments again.”

However, no matter how low the mortgage rate, HAMP will not help some people with no or very little income.

“Sometimes is it jus a timing problem, when you’re applying for HAMP,” Peer said.

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• Loan mods continue drop

The number of people in Colorado entering the Obama Administration’s largest program to prevent foreclosures hit a new low in February, with only 1,658 people being accepted into the Home Affordable Modification Program.

The number of people entering the required “Active Trials” portion of HAMP was down 5.9 percent from the previous monthly low of 1,759 set in January. There are 7,827 people in the permanent modification program in Colorado, compared with 7,587 in January. Nationally, 557,076 people are in the permanent program, a far cry from the 3 million to 4 million homeowners the Obama Administration hopes would be helped by HAMP, the signature portion of the Making Home Affordable Program.

Scrap HAMP?

Experts have mixed views on whether HAMP should be continued, both in the Denver area and across the country.

“HAMP just needs to be scrapped,” said Ron Woodcock, a broker with RE/MAX Southeast. “It is costing taxpayers too much money. It is not sound.”

Woodock said while he appreciates that it helps some people, he says in other cases it hurts consumers, because it takes loan servicers, who determine whether borrowers can participate in the program, take so long to reach a decision on whether they can be accepted. He said two of his clients last year ran into problems because they were rejected into the permanent program four to six weeks before their homes were headed for foreclosure sales. In one case, he was able to to do a short sale, in which the lender accepts less than the mortgage amount. But the other home was sold as a foreclosure at a public trustee auction.

“And I’ve never understood that trial modification part of it from day 1,” Woodcock said. “Either accept them into the program or not.”

Revamping HAMP an option

Nationally, some legislators agree with Woodcock and want to scrap it, but others want to revamp it “and change the scope so it actually can help 3 or 4 million people,” said Shannon Peer, head of counseling services at the non-profit Brothers Redevelopment, which runs the Colorado Foreclosure Hotline.

Peer falls into the second camp. Even in its current form, it helps people, he said.

He notes that 240 people joined the permanent program in February from January, which he said is consistent with the number of people making that transaction each month during the past six months. “When I see a number like 240 in a month being helped, I think it is a viable program,” Peer said.

When the program was launched in March 2009, many borrowers were still reeling from mortgages that started with low teaser rates, which had skyrocketed to 11 percent or 12 percent, he said.

High rate no longer the culprit

“Now, most of the people we’re seeing do not have outrageous interest rates,” Peer said. “Most of them are in the 5 percent or 6 percent range. It is not an interest rate problem, it is an income problem.”

He said when the Making Home Affordable Program came on the scene, “lowering interest rates was the craze,” which initially made sense. Under HAMP, borrowers can get rates as low as 2 percent, which generally adjust upward. The median monthly savings for someone in HAMP is $527.97, a 37 percent drop from their pre-modification loan. So far, HAMP has saved borrowers almost $5.4 billion.

Peer said many proprietary programs from banks instead of lowering the interest rate, will give borrowers a break from payments until they get back on their feet, financially. Then, their payments are temporarily increased to make up for the time when they weren’t making a mortgage payment or making a greatly reduced payment.

“For a lot of people that is the best option,” Peer said. The biggest problem is that typically the adjustment period to make up missed payments is only six to 12 months, which can mean rather hefty additional payments. He said it would be better to stretch the payments out to “reduce the amount they have to pay each month to catch up.”

Peer said he would  be in favor of HAMP offering that alternatives. He notes that whether you lower the rate, as HAMP typically does, or give someone a break on payments, both require that the borrower have adequate income to make payments. “You already have a structure in place, so it doesn’t seem to make sense just to get rid of it,” Peer said.

Also, since the U.S. Treasury has been requiring servicers to pre-screen borrowers before allowing them into the trial program, the number of people entering HAMP has gone down dramatically, but fewer are being bounced from the permanent program.

That is important, said Zachary Urban, Director of Housing for the Adams County Housing Authority. “Because of better underwriting, the recidivism rate in HAMP is now extremely low.”

One reason HAMP numbers are dropping is likely because banks are offering more proprietary programs and are more aggressively offering them to borrowers. “So whether it is HAMP or a proprietary program, they are only catching borrowers with a proven ability to perform.”

So should Uncle Sam step aside and let the private sector take it over?

Urban doesn’t think it is time to pull the plug on HAMP. “I think it still serves as a backstop for some people,” Urban said.

[table "174" not found /]

MSA	Active Trials	Permanent Modifications
Boulder	67	240
Colorado Springs	165	879
Denver-Aurora	1,004	4,990
Fort Collins-Loveland	72	322
Grand Junction	55	205
Pueblo	45	188

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