Monday, November 30, 2009

US Treasury Announces "Mortgage Modification Conversion Drive"

by Calculated Risk on 11/30/2009 11:20:00 AM

From the U.S. Treasury: Obama Administration Kicks Off Mortgage Modification Conversion Drive

The U.S. Department of the Treasury and Department of Housing and Urban Development (HUD) today kick off a nationwide campaign to help borrowers who are currently in the trial phase of their modified mortgages under the Obama Administration's Home Affordable Modification Program (HAMP) convert to permanent modifications. ... Roughly 375,000 of the borrowers who have begun trial modifications since the start of the program are scheduled to convert to permanent modifications by the end of the year. Through the efforts being announced today, Treasury and HUD will implement new outreach tools and borrower resources to help convert as many trial modifications as possible to permanent ones.

"We are encouraged by the pace at which trial modifications are now being made to provide immediate savings to struggling homeowners," said the new Chief of Treasury's Homeownership Preservation Office (HPO), Phyllis Caldwell. "We now must refocus our efforts on the conversion phase to ensure that borrowers and servicers know what their responsibilities are in converting trial modifications to permanent ones." In her new role, Caldwell will lead HPO's conversion drive efforts.
The new push includes "operational metrics to hold servicers accountable for their performance, which will soon be reported publicly" and "Servicers failing to meet performance obligations ... will be subject to consequences which could include monetary penalties and sanctions".

With 375,000 borrowers eligible for permanent modifications by the end of the year, we would expect a minimum of 190,000 permanent modifictions through December - and a 50% conversion rate would be considered very poor. Many of these permanent modifications will probably fail over time too.