Lately, there hasn’t been much love for government loan mod programs. News has been swirling the past month that revisions are pending to the government’s underperforming loan modification programs, and sharp critiques have abound on the programs’ performance records. And, according to recent data from the Office of the Comptroller of the Currency (OCC), private mod programs are not doing so hot, either; in fact, they’re doing much worse.
The OCC reports that more than 34 percent of the 129,000 private modifications in 2010’s first quarter went two months without a payment within the first year of the newly modified loan, compared to just 19.4 percent of the 100,200 mods completed by the government’s Home Affordable Modification Program (HAMP).
“HAMP modifications have generally performed better than other modifications implemented during the same periods,” the OCC said. “These lower post-modification delinquency rates reflect HAMP’s emphasis on the affordability of monthly payments relative to the borrower’s income, verification of income, and completion of a successful trial payment period.”
HAMP posted similarly superior statistics for the first quarter of this year. Of the 53,250 HAMP mods in that span, 5.8 percent were seriously delinquent within the first three months, compared to 10.9 percent of private mods.
It wasn’t always like that, though. As Neil Barofsky, the former special investigator for TARP, said in a recent appearance on Capital Hill, HAMP was rushed by the Treasury Department in its initial phases.
“Treasury rushed HAMP out the door in a manner best described as ‘ready, fire, aim,'” Barofsky said.
But now, HAMP approaches its mods with considerably more care, said Marietta Rodriguez of NeighborWorks America, while private firms rarely take into account the borrower’s entire debt-to-income ratio. Until those firms do consider such details, redefaults will continue.
“From what we’re hearing from housing counselors on the ground, unemployment and underemployment continues to hurt the borrower’s ability to pay,” Rodriguez said. “Until the economy begins to improve, you’ll continue to see redefaults heading in this direction.”