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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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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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.

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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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Only 1,762 Colorado homeowners in January entered the Obama Administration’s signature program to keep people losing their homes, the lowest number of people to enter the Home Affordable Mortgage Modification Program, or HAMP, since it was launched in 2009, shows a national report released on Wednesday.

The low comes as a national debate continues on whether HAMP is worth keeping. Some Republican Congress members are seeking legislation to dismantle HAMP, which initially was estimated to cost $75 billion, but only $1 billion has been spent so far. One legislator calls HAMP a “colossal failure.”

Too early to scrap HAMP

But Shannon Peer, who heads counseling services for the non-profit Brothers Redevelopment, which manages the Colorado Foreclosure Hotline (877-601-HOPE), said it may be premature to scrap the program.

“Obviously, the program is not going to reach its initial (national) target of helping 3 to 4 million people,” Peer said. Still, it served as the catalyst for private servicers to implement their own programs to keep people in their homes. Peer said there is no guarantee that the private sector will pick up the slack if HAMP goes away. Servicers handle the monthly mortgage obligations of borrowers.

“My concern is that if you pull the plug on HAMP, private servicers will pull the plug on their programs, too,” Peer said. “That’s a pretty big unknown and a huge matter of concern.

No silver bullet

Neither HAMP nor any other single program can resolve every issue a distressed homeowner is facing, said Zachary Urban, director of housing counseling for the Adams County Housing Authority.

“It would be nice to suggest there is a “silver bullet” out there to keep people in their homes,” Urban said. “If you think there is a program out there that can keep everyone from losing their homes, that is a lost cause.” He said the purpose of any loss-mitigation program is to determine the most feasible and financially responsible decision for both the bank the the borrower. In some cases, that may be a short sale, in which the bank accepts less than the mortgage amount.

“I know the numbers seem very low,” for HAMP, Urban said. “I think the reasons they are low is that those going into it are not being helped by proprietary (bank) programs. Even if (HAMP numbers) go lower…I think it it not a failure of the program, but changes in the circumstances for the borrower.”

Nationally, only 11% drop out

Nationally, 89 percent of the people accepted into HAMP’s permanent program continue to benefit from lower mortgage payments and have not defaulted on their obligations. Last year, the Treasury Department advised servicers to pre-screen applicants, so they would have a better chance of succeeding if they received loan modifications. That resulted in a dramatic drop in the number of homeowners accepted into the required “active trials” portion of the program. For example, while 1,759 homeowners were accepted into the active trials in January, a 6 percent drop from December, some 11,708 were accepted into the program in January 2010.

Peer noted that the program was created to help people saddled with high-interest mortgages. Many of those have since worked their way through the system, and the culprit leading to the vast majority of foreclosures in Colorado and across the country for more than a year has been the high unemployment rate.

When economy picks up, HAMP will be more valuable

“HAMP does not help people who lost their jobs and have no income,” Peer said. “But at some point in Colorado, more people are going to get jobs, the unemployment rate is going to go down, and then there could be a real benefit to HAMP. If in the next few months, people in Colorado started to get back on their feet financially, it would be a shame if a program like HAMP was not around to help them.”

Also, the program has cost a fraction of the early estimates. “Perhaps some of that money could be re-allocated to other programs,” Peer said. “I personally would like to see more money directed to housing counseling.”

Finally, he said that while the numbers of people who have been helped are far smaller than anticipated, it still does provide a benefit, he said.

“In January in Colorado, there was a one-month gain of 218 homeowners who were able to keep their homes,” by being accepted into the permanent part of HAMP, Peer said. Since January 2010, 5,790 people have entered the permanent modification part of the program in Colorado, or an average of 445 people each month. In recent months, about 240 to 250 people had entered the permanent  program from the previous month, Peer said. ”While the numbers were down in January, helping 218 people is not insignificant,” Peer said.

Indeed, Urban said that the total dollar foreclosure volume in Colorado this year already has hit $1 billion,  when you measure the loan amount of homes entering the process and those being sold at public trustee auctions. He said that while it is true that the $1 billion figure is “skewed” a bit to the high side, because the loans in default typically have some value, but it is still a big number.  ”If you just look at Colorado, which already had a $1 billion impact on our economy, and you multiply those kind of numbers in states all across the country, I think the HAMP money has been very well spent.”

Programs create false hope

But Ron Woodcock, a broker with RE/MAX Southeast and a member of the Colorado Prevention Task Force and Colorado Housing Counseling Coalition, believes that neither HAMP, nor a sister government program, HAFA (Home Affordable Foreclosure Alternative) program, have much value.

“My first thought would be to scrap them, rather than trying to re-invent them,” Woodcock said. “I think they can hurt people by creating false hope. People apply for the program and wait, and wait and wait, and then they are turned down.” One woman, he met, waited months to hear from a program and when she was rejected, she was forced to file for bankruptcy.

He also said he doesn’t like the idea of a trial program. “If they are going to have the programs, either accept you into it or not. Having these trial programs just muddies the waters.”

Also, he said many consumers he has spoken with are trying to navigate the HAMP or HAFA waters themselves, without the help of a HUD-approved counselor, such as those who help people who call the Colorado Foreclosure Hotline. “If you try to do this without the help of a HUD-approved counselor, good luck,” Woodcock said.

Nationwide, 539,493 of the 606,607 permanent modifications started are still in the program. However, a total of 740,240 trial modifications have been cancelled since the  program began.

Homeowners in the program have cut their mortgage payments by about $5 billion. The median monthly savings has been $527, or a 37 percent drop from their mortgage payments before they were modified.

“Colossal failure”

A number of  Republicans, led by Rep. Jim Jordan, R-Ohio, are seeking legislation to unwind HAMP.

“HAMP is a colossal failure,” Jordan said in a statement. “In many cases, it has hurt the very people it promised to help. It’s one more example of why government interference in the private sector doesn’t work and that’s why it should be repealed.”

However, the liberal Center for Responsible Lending, said that with 50,000 new foreclosures started each week nationally,  it would be a grave mistake to dismantle the program, even as four bills to do so are scheduled to be heard on Thursday.

The Washington, D.C.- based CRL that said industry figures show a record five million homeowners are at risk of losing their homes. Avoiding unnecessary foreclosures and encouraging loan modifications will be key to economic recovery, as the nation is “sorely missing” the jobs and growth provided by a healthy housing market, the group argues.

Foreclosure cure needed

“When we’re in the midst of an epidemic, we don’t close all the hospitals—we work faster and harder to find a cure,” CRL president Mike Calhoun said in a statement.“We call on Congress to strengthen foreclosure prevention efforts by holding servicers accountable and requiring a review of every mortgage loan before foreclosures proceed.”

Ralph Bostic, HUD Assistant Secretary for Policy Development and Research, said the Obama Administration has taken “unprecedented actions” to keep millions of famililes in their homes, and helping millions more by refinancing. “But the data clearly show that the market remains extremely fragile,” Bostic said. “While we cannot stop every foreclosure, we know that many responsible homeowners are still fighting to make ends meet.”

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The number of Colorado homeowners participating in the  first-stage of the federal government’s biggest program to keep people from losing  their homes in foreclosure fell 23.25 percent in August from July, shows a report released today.

The monthly report on the Making Home Affordable Program shows that only 2,555 Colorado homeowners were in “active trials” in the Obama Administration’s $75 billion Home Affordable Modification Program, or HAMP, compared with 3,329 in July.  Although August marked the lowest number of homeowners in the trial program, required before they can receive a permanent modification of their loan, the rate of decline has slowed. In July, the number of homeowners entering the program had fallen by 31.6 percent from June. Homeowners are required to participate in active trials before their mortgages can be permanently mortgages.

The number of Colorado homeowners receiving permanent modifications rose to a record 6,469 in August, a 5.6 percent increase from the 6,124 in July. However, that was the smallest month-to-month percentage increase this year.

Earlier this year, the Treasury Department advised loan servicers – those who handle the day-to-day management of mortgages, including deciding  whether the rate can be lowered – started pre-screening homeowners in the first stage, resulting in more than half of the applicants being rejected at the early stage. The idea was to give homeowners in the permanent program a better chance of making their new, lower payments and keeping their homes. Nationally, 468,058 permanent modifications have been started and 448,937 are in the program - far below the goal of helping 3 to 4 million homeowners.

“Dismal failure”

“To say that HAMP is a dismal failure is to give it a compliment,” said Ron Woodcock, a broker with RE/MAX Southeast. Woodcock, who specializes in handling short sales, in which the lender accepts less than the mortgage amount.  The market would work better, Woodcock said, if  “the federal government just got out of the way.” Woodcock said there is nothing preventing private lenders to provide their own loan modification programs, without government programs. Indeed, the Treasury department on Thursday said that “fewer than 15 percent of homeowners in canceled trials are moving toward foreclosure.” Instead, many of them have found alternative modifications or have been current. The median savings for someone in the program is more than $500 per month, a 36 percent reduction.

Mike Rinner,  of the Genesis Group, analyzed the number of Colorado homeowners in the permanent modification program and calculated that it cost every homeowner in the state the equivalent of $18.48 each year to pay for the permanent modifications.

Bailout burden for generations

“This is just another example of how politicians are pushing more debt onto us taxpayers, our children and our grandchildren, ” Rinner said. “How many of Colorado’s 2.1 million households would vote to pay $18 per year so that 6,469 lucky people could get lower house payments? Not me! I think HAMP will do little to heal housing markets at great taxpayer expense and is bad economic policy, as were the “cash for clunkers” and home buyer tax credit programs.

And the taxpayer tab is sure to rise, as more people receive permanent modifications.

“Where will it end up – costing every household in American another $50 per year to provide the lucky few with lower house payments?, Rinner asked. Yet, he does not fault someone taking advantage of the program. “The fault is with our policy makers who continue to use taxpayer money to implement these ineffective programs that benefit a select few people without helping the general market or the country as a whole,” Rinner said.

However, Zach Urban, spokesman for the Adams County Housing Authority, said the tax-payer cost is much less than Rinner’s calculations, and the rewards are greater than what is apparent at first blush.

Wait. Maybe it is cost-effective

Urban said that taxpayers are not on the hook for the typical savings of $500 per month for homeowners. Instead, the cost to taxpayers is to pay the $1,500 incentive to servicers for each loan modified, he said Using Rinner’s math, that would equate to a one-time cost of each homeowners in Colorado of about $4.62. “In my mind, this is a very cost-effective program,” Urban said.

He also said far more than the 6,469 homeowners in the permanent modification are being helped. That is because when a home goes into foreclosure, properties on either side of it, as well as behind and in front of the distressed property, at the very minimum, are impacted, he argues. “I think if you asked people if they would rather pay the cost of a Big Mac or two – or the equivalent of a drink or two  at Starbucks – or lose $10,000 in property value because their neighbor’s home went into foreclosure, they would be more than willing to pay the $5,” Urban said. In any case, if those 6,000-plus homes had all gone into foreclosure, the loss in property taxes would have far exceeded the $18.48 per taxpayer calculated by Rinner, Urban believes.

Still, Urban understands HAMP is no where near as successful as the Obama Administration had hoped.

Lenders can’t keep up

“I’ve talked to a lot of loan servicers, and they are just over-whelmed,” Urban said. “I really think the lenders are trying to do as much as they can, but they can’t keep up with all of the calls.”

There also is a more basic problem, he said. HAMP, Urban said, was created when the nation’s housing market was still reeling from toxic loans that were adjusting upward, and lowering their rates would keep them  in their homes.

“If you could pay, you could stay,” Urban said. Now, however the driving force behind the vast majority of foreclosures is the loss of jobs, not subprime loans. “If  you have zero income, it is hard to imagine any program that will help,” he said. “I think HAMP is a cost-effective program for some people, but it is not a one-size-fits-all solution.”

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There were only 3,329 Colorado home owners participating in “active trials” in the Home Affordable Modification Program in July, a 28.7 percent drop from the 4,670 in June. Homeowners seeking to reduce their mortgages in order to avoid foreclosure, must first enroll in the active trials portion of HAMP, before they can receive permanent modifications. There were 6,124 Colorado homeowners in the Permanent Modification program in July, slightly more than an 8 percent increase form the 5,656 in June.

Documents upfront, reduce later dropouts

The number of people in the first stage of the program, both nationally and in Colorado, has been dropping since the U.S. Treasury and the U.S. Department of Housing and Urban Development, required more upfront documentation before homeowners could be accepted into the trial program, which lasts at least three months. The new rules went into effect on June 1, but many loan servicers began implementing the changes even before June.

The government wants lenders to pre-screen applicants to increase their chances of being accepted into the permanent modification program. The $75 billion program was launched in March 2009, and many homeowners ended up being in the trial program for many months, only to be told they do not qualify for the permanent modification program.

Programs not cutting the mustard

Ron Woodcock, a broker with RE/MAX Southeast, questions the value of HAMP and a sister program, HAFA, or Home Affordable Foreclosure Alternatives.

“If you ask me, HAMP and HAFA, are not good stuff,” Woodcock said. “As they get tougher on the criteria for the trial modifications, it may lead to higher foreclosures.”

For more than two decades, first in Florida and now in Colorado, Woodcock has specialized in selling distressed properties, either foreclosures, or increasingly, short sales. A short sale is when a lender accepts less than the amount of the mortgage.

“I’ve been doing a lot of short sales for people who were in trial mods,” Woodcock said. “They were denied into the permanent program. They were in HAMP or something similar. If they could not maintain their payments, they are back to square one.”

Consumers: Many options available

Shannon Peer, director of Housing Counseling at Brothers Redevelopment, which manages the Colorado Foreclosure Hotline, said when HAMP first began under the umbrella of the Making Home Affordable Program, lenders were basically enrolling people in the trial program over the phone.

“So a very large percentage of the pool accepted into the trial program could not move on the permanent modification,” Peer said. “Now, people have to prove to them with some documentation that they are good candidates for the permanent modifications.”

Yet, HAMP does not work for a lot of people, because of the shift from people saddled with toxic loans that they couldn’t afford to more basic economic woes, he said.

“The root problem for the majority of the people now is unemployment or under-employment,” Peer said.

And this month, yet another federal program was launched, which is designed to help people keep their homes who are unemployed.

“But usually you have to start with HAMP,” Peer said. “That is why it is important for consumers to speak with HUD-certified counselors. When they are talking to the loan servicers, they will ask what the borrower’s ‘options’ are, not his option.”

He said homeowners who are facing losing their homes should be willing to roll up their sleeves, and not expect that their lender will tell him all of his options. “A lot of lenders will tell you several options, but you can’t be assured that they will tell you everything that is out there,” Peer said. Nationally, more than half of the homeowners in canceled trials receive alternative modifications, become current, or pay off the loan. Insufficient documentation, missed trial payments or mortgage payments already less than 31 percent of the home owner’s income are the man reasons for cancellations.

Colorado did slightly better, as a percentage drop, than the nation as a whole. Last month, there were 255,934 homeowners in the Trial Modification program, a 29.7 percent drop from the 364,077 in June. So far, 616,839 trial modifications have been cancelled across the country, while only 12,932 permanent modifications have been canceled. There are currently 421,804 permanent modifications, while there are an estimated 3 million delinquent loans and almost 1.5 delinquent borrowers, who could potentially be eligible for HAMP.

Billions saved

And for those who qualify, the savings are significant. The median monthly payment for a homeowner receiving a permanent modifications dropped to 36 percent to $839 from $1,426, a $513 monthly savings. The aggregate reductions in monthly payments for borrowers in active trials and permanent modifications totals more than $3.1 billion.

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

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The  U.S. Department of the Treasury and the  Department of Housing and Urban Development  today released January data for the Obama Administration’s Home Affordable Modification Program (HAMP), which showed that a total of 1,797 homeowners in Colorado so far have received permanent loan modifications. Colorado ranked No. 20 in the nation for the number of permanent loan modifications, which the government hopes will keep homeowners out of foreclosure.

Huge percentage jump

The January figures marks almost  a 68 percent jump from the 1,072 permanent loan modifications that had been made in Colorado by  the end of December.On a national basis, 116,297 permanent loan modifications have made made, nearly doubling the December tally, according to the government. In total, almost 1.3 million offers have been made for trial plan offers, which are required before the loans can be made permanent. In Colorado, there have been 11,708 trial modifications.

Earlier, when I blogged that there had been 1,072 loan made through December, Shannon Peer, the director of counseling at the non-profit Brothers Redevelopment in Edgewater, predicted that the numbers would grow quickly, as servicers and lenders geared up to better handle the large number of homeowners with distressed properties that are seeking help. Servicers typically collect the monthly interest and principal payments on mortgages, but in most cases are not the investors in the mortgage securities.

The exponential increase in people being helped likely will continue, he said.

Counselor saw it coming

“This is what I anticipated happening,” Peer said. “The numbers should continue to grow. It will help. The numbers are moving in the right direction.”

He said he recently met with Bank of America officials, and they are “putting in place steps,” to have servicers send documents using computers, rather than faxes, which should largely mitigate the lost documents that so often delay the process. A frequent complaint of homeowners is that loan packaged and documents they send to their lenders are lost, delaying and sometimes scuttling, any hope of locking in a low mortgage rate and longer amortization terms that would allow them to keep their homes.

But the numbers are still too low in Colorado to make a real dent in the foreclosure crisis, said Byron Koste, director of the Colorado Real Estate Center at the University of Colorado Boulder.

Numbers still too low

“It’s easy to have high percentage increases when you start with low numbers,” Koste said. “You have to be careful not to mislead people. I am glad that the number of people being helped is going up, but it is still not nearly enough.”

Koste noted that Kiernan Conway, of the Federal Reserve Board in Atlanta, who will be the keynote speaker at a Colorado Real Estate Center-sponsored conference in downtown on March 2, noted that at least 10 percent of the troubled loans must be modified to make a difference. In a recent speech, Conway pointed out that despite loan modifications, the number of foreclosures continue to rise.

Koste said probably around 1 percent of the troubled loans in Colorado and across the nation have been modified.

“Nationally, if instead of 100,000 we had 700,000, it would start to do some real good,” Koste said. “But what we really need is 20 percent or 30 percent of the loans being modified. If we could do 20 percent a year, we could work our way out in five years. But that’s not going to happen. Loan modifications are not the answer.”

Banks lack incentives

For one thing, banks have disincentives, but few incentives, to modify loans. Koste noted that in 1933 Congress adopted the Home Owners’ Loan Act, which awarded $770 million to the thrift industry to help deal with borrowers who could not repay their loans. He said that worked much better than many people anticipated. It wasn’t until the de-regulation of the thrift regulation in the 1980s, which led to irresponsible lending by savings and loans, that led to demise of much of the once mighty S&L industry. Colorado was one of the hardest states hit by the S&L debacle, as it included the former Silverado Savings and Loan, which ended up costing taxpayers more than $1 billion.

“I don’t know if something like that is the answer, but I do know that we can’t just keep putting Band-Aides on the problem – it’s too deep for that,” Koste said.

He said that creating more high-paying jobs will help a great deal, but he said higher interest rates also are needed.

“I know it is heresy to say that,” Koste said. “You and I like low interest rates. But that is not the solution.” Indeed, unrealistically low mortgage rates were  a large part of the problem that created the housing bubble that created the first nationwide housing collapse in the U.S. since the Great Depression, he said.

Risk-reward ratio out of whack

“Basically, we had unreasonably low interest rates, where people were being promised unreasonably high returns, based on what we thought was the underlying value of the asset,” Koste said. “That is just not sustainable.”

But he said the cost of the money has to correlate with the expected return.

“We made it very easy for everyone to get a loan to buy a house, which we thought just would keep appreciating,” Koste said. “But what we teach here and what we know to be true, is that the cost of the money needs to reflect the cost of the expected return. If you want basically zero-percent money, go live in Japan. They’ve had money at basically zero now,” and has one of the worst economies, as measured by investment returns, in the world.

Levine: More questions than answers

Mark Lee Levine, director of the Burns School of Real Estate and Construction Management, Daniels College of Business, University of Denver, said there are many unanswered questions.

“It’s not enough to just know the statistics as far as the number of workouts, but what do they mean by loan modifcations? Are they reducing the principal in addition to the interest rate? Are they demanding more collateral? The number of years of amortization? What is the size of the loans being modified?”

Also, Levine said that he hopes banks are doing their due diligence to make sure the homeowners receiving modifications will not lose their homes even after they get better terms

“In broad terms, people tend to face foreclosure either because they have lost their jobs and do no longer have the required income, or some outside event, such as a large medical expense occurred,” Levine said. “If a person doesn’t have a job that pays enough to cover even the lower mortgage, why bother spend all the time and effort modifying it, if the home is likely to go into foreclosure anyway. But there may be some people whose spouse still works or their job prospect brightens, or they no longer have the expense of a one-time occurrence, who can be helped.”

In any case, something needs to be done, both for homeowners and on the commercial real estate side, he said. “I just came back from a think tank discussion on that topic,” Levine said. “If something isn’t available, a lot of commercial real estate owners are just going to mail their keys back to the lenders and say, “Now it’s your problem.” The same is true for homeowners.”

Still, overall, the government is pleased with the growth of HAMP.

“With nearly one million homeowners paying less each month and the number of permanent modifications steadily rising, HAMP is doing the job it was designed to do,” said Phyllis Caldwell, Chief of Treasury’s Homeownership Preservation Office, said in a statement.”Struggling families are receiving payment relief and the housing market is showing signs of stabilization.”

Mortgage modifications are one piece of the Obama Administration’s broader housing market stabilization plan. Other efforts include support for lower mortgage rates and access to credit, state and local housing agency initiatives, tax credits for homebuyers, neighborhood stabilization and community development programs, and support for mortgage refinancing. One year since President Obama announced the Homeownership Affordability and Stability Plan, more than 4 million homeowners have refinanced their mortgages to more affordable levels, interest rates are at record lows, home prices and home sales are rising again and the economy is growing, the government said.

Obama Administration remains hopeful

“As the number of permanent modifications grows, HUD will continue to work with our Administration partners and utilize our broad network of housing counseling agencies to increase those numbers still further,  said William Apgar, HUD’s senior advisor for mortgage finance.

HAMP is the most ambitious government program of its kind – reaching far more homeowners than any previous program has ever attempted. Less than a year after its launch, the program is providing significant relief to struggling families, according to the govenment.More than 940,000 homeowners currently have reduced monthly mortgage payments with a median savings of more than $500. That is an aggregate savings of more than $2.2 billion.

With nearly 1.3 million trial modifications offered already, the program is on pace to meet its overall program goal of providing 3 to 4million homeowners the opportunity to stay in their homes, according to government projections.

John Rebchook can be reached at JRCHOOK@gmail.com or 303-945-6865.

Related Posts:

• Only 1,072 permanent loan modifications in Colorado
• Loan modifications could help thousands in Colorado
• HAMP activity continues to fall
• Loan mods fall 23%
• Loan-help pipeline drying up

The ranking is a marked improvement from just a few years ago, when Colorado’s foreclosure rate was leading the nation, according to RealtyTrac, the Irvine, Calif.-based company that released the report. In 2006, Colorado was No. 1 for the most of the year. In 2007, it was usually ranked in the top three.  Even as foreclosure rates soared in other states, surpassing Colorado’s rate, the state was typically on RealtyTrac’s top 10 list.

1 out of 428 households in foreclosure

For January, one out of every 428 households in Colorado was in some stage of foreclosure, compared with the overall U.S. average of one out of every 409 households. And while the national foreclosure rate dropped 9.67 percent from December, Colorado’s dropped by 16.31 percent.   Some 5,029 homes were in some stage of foreclosure from the first Notice of Default to REO (Real Estate Owned) when the bank takes over the property following a public trustee auction, according to RealtyTrac, which collects and sells real estate data.

Colorado holding its own

Ryan McMaken, spokesman for the Colorado Division of Housing, which is last week released its own foreclosure report, using a different methodology, said it makes sense that Colorado has a lower foreclosure rate than the national average, ” given the unprecedented growth in foreclosures in places like Florida, California, Arizona and Michigan.  Colorado simply wasn’t able to keep up with those places when it came to new foreclosures.”

Also, Colorado’s unemployment rate is lower than the national average of just below 10 percent.

“Now employment is the driving factor, and since Colorado has a better unemployment rate than the national average, I expect to see foreclosures here continue to fall behind the national rate,” McMaken said.

Still, “we shouldn’t be smug, of course,” he added. “There’s still no positive job growth in Colorado and we have yet to see what will happen when the home buyer tax credits finally expire,” later this year.

For the entire nation, there were 315,716 properties in January in some stage of the foreclosure process, according to RealtyTrac. REO activity nationwide was down 5 percent from the previous month, but up 31 percent from January 2009; default notices were down 12 percent from the previous month, but up 4 percent from January 2009; and scheduled foreclosure auctions were down 11 percent from the previous month, but up 15 percent from January 2009.

Foreclosure surge may be coming

“January foreclosure numbers are exhibiting a pattern very similar to a year ago: a double-digit percentage jump in December foreclosure activity followed by a 10 percent drop in January,” said James J. Saccacio, chief executive officer of RealtyTrac “If history repeats itself we will see a surge in the numbers over the next few months as lenders foreclose onsdelinquent loans where neither the existing loan modification programs or the new short saleand deed-in-lieu of foreclosure alternatives works.”

Nevada was ranked No. 1, with one out of every 95 homes in some stage of foreclosure. Nevada has had that dubious honor for 37 consecutive months. California, Florida and Arizona posted the three highest state totals in terms of properties receiving foreclosure filings in January, and together those states accounted for more than 44 percent of the national total.

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

Related Posts:

• Colorado No. 10 for foreclosures
• Colorado No. 11 for foreclosures in October
• Rising foreclosure filings worries experts
• RealtyTrac’s foreclosure data wrong, state officials says
• Denver 11th for foreclosures

The statewide hotline on Tuesday, which was launched in October 2006, broke the 100,000 barrier on Tuesday. It has been averaging 180 calls per day. Hotline staff members have seen call volume rise exponentially. It really took off in late 2007.

“Our calls have increased by more than 60 percent in the past two years,” said program manager Stephanie Riggi. “And with new programs in place that promote the hotline, like last year’s house bill 1276, we continue to see high call volume each month.”

The hotline receives between 3,500 and 4,000 calls each month, a pattern that began and held in August 2008 after the implementation of HB 1276, the foreclosure deferment bill. Homeowners who may be eligible for the program are notified via posting on their property. The posting directs homeowners to the Hotline in both English and Spanish.

Riggi and hotline staff use call volume numbers to measure public awareness of the Hotline.

“One hundred thousands calls doesn’t mean 100,000 people have utilized our services,” she explained. “About 20 percent of people who call the hotline come in for a counseling session. But it does mean that we’re continuing to reach a larger population.”

Despite continual rises in call volume, the Hotline and its 26 non-profit HUD-approved partner agencies have handled the increase. Of those callers who choose to meet face-to-face with a Hotline counselor and complete the counseling process, 80 percent reach a positive resolution. Positive resolutions include but are not limited to loan modifications, refinancing, and selling the property.

“Homeowners should not be ashamed to reach out for help,” Riggi said. “Our services are free and confidential. Concerned homeowners are calling us, they’re meeting with housing counselors, and they’re finding those options that work best for them.”

To schedule an appointment with a housing counselor, call 1-877-601-HOPE (4673). For more information, visit this link.

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

Related Posts:

• Foreclosure filings could hit 40,000 in Colorado this year
• HAMP activity continues to fall
• Colorado foreclosures both rise and fall
• Rising foreclosure filings worries experts
• Foreclosures rise in Colorado

I was on Channel 9 news this morning to talk about the story I wrote earlier that only about 1,000 people in Colorado have so far received permanent loan modifications. To check out the video, please visit this link. To read the original story, please visit this link.

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

Related Posts:

• Colorado loan modifications rise 68%
• HAMP hits new low
• HAMP activity continues to fall
• Loan mods continue fall
• HAMP hits low in Colorado