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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.”
