Almost 30% of HAMP are back in default, But, It’s getting worse

The Home Affordable Modification Program (HAMP) has not helped as many borrowers as it may seem, Oh really you may say, according to the Office of the Special Inspector General for the Troubled Asset Relief Program.

HAMP, a government loan modification program created to prevent foreclosures, has provided about 1.2 million modifications to distressed borrowers since its inception in 2009. Of those borrowers, 306,538 fell behind on their payments by three months, which means in actuality, 865,100 are still actively in the program, the taxpayer watchdog agency revealed. Borrowers who miss three consecutive payments become disqualified from the program.

The percentage of modified homeowners who end up as re-defaulters has steadily increased over time. At the end of 2009, the share stood at 1 percent and has since risen to 26 percent as of April 2013 with 22 percent of those have entered into the foreclosure process.

Among the oldest HAMP modifications, the re-default rate was 46 percent. For loans modified in 2010, the re-default rate averaged 38 percent.

According to the report, modified homeowners most likely to fall behind on payments received the smallest monthly payment reductions; are underwater on their mortgage; had subprime credit scores when modified; and have high debt burdens.

HAMP re-defaults not only impact homeowners and affected communities, but they also cost taxpayers. Taxpayers have lost a total of $815 million in TARP funds that were used to pay incentives for 163,811 modifications that re-defaulted.

“Homeowners who receive a HAMP permanent modification but end up losing their home to foreclosure or fall out of the TARP program are not being helped to keep their homes as TARP intended, and taxpayers lose the positive impact these funds were to provide for the individual family and the community at large,” the report explained.

From the Making Home Affordable website. HAMP is;

Home Affordable Modification Program

If you are not unemployed, but you’re still struggling to make your mortgage payments, you may be eligible for the Home Affordable Modification Program (HAMP®). HAMP may lower your monthly mortgage payments in order to make them more affordable and sustainable for the long-term.

If you currently occupy your home as your primary residence, we encourage you to contact your mortgage servicer as soon as possible to begin the HAMP evaluation process.

In an effort to continue to provide meaningful solutions to the housing crisis, effective June 1, 2012, the Obama Administration expanded the population of homeowners that may be eligible for the Home Affordable Modification Program to include:

• Homeowners who are applying for a modification on a home that is not their primary residence, but the property is currently rented or the homeowner intends to rent it.
• Homeowners who previously did not qualify for HAMP because their debt-to-income ratio was 31% or lower.
• Homeowners who previously received a HAMP trial period plan, but defaulted in their trial payments.
• Homeowners who previously received a HAMP permanent modification, but defaulted in their payments, therefore losing good standing.

If you are a homeowner who falls into any of these criteria, you may be eligible for a modification under the expanded criteria. Please check with your Home Affordable Modification Program

If you are not unemployed, but you’re still struggling to make your mortgage payments, you may be eligible for the Home Affordable Modification Program (HAMP®). HAMP may lower your monthly mortgage payments in order to make them more affordable and sustainable for the long-term.

If you currently occupy your home as your primary residence, we encourage you to contact your mortgage servicer as soon as possible to begin the HAMP evaluation process.

In an effort to continue to provide meaningful solutions to the housing crisis, effective June 1, 2012, the Obama Administration expanded the population of homeowners that may be eligible for the Home Affordable Modification Program to include:

• Homeowners who are applying for a modification on a home that is not their primary residence, but the property is currently rented or the homeowner intends to rent it.
• Homeowners who previously did not qualify for HAMP because their debt-to-income ratio was 31% or lower.
• Homeowners who previously received a HAMP trial period plan, but defaulted in their trial payments.
• Homeowners who previously received a HAMP permanent modification, but defaulted in their payments, therefore losing good standing.

If you are a homeowner who falls into any of these criteria, you may be eligible for a modification under the expanded criteria. Please check with your mortgage company to see if you are eligible to begin the HAMP evaluation process.

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Foreclosures continue to block housing recovery

Analysts claim that even though the housing market is on the mend, with progress even in the hardest-hit states, the backlog of homes in foreclosure and real-estate owned (those already foreclosed on) properties is still clogging the pipeline.

The volume of distressed properties continues to impact housing momentum, and consequently, there is a compelling need for improved public policy on the local and national levels to minimize losses and externalities resulting from foreclosures and REO inventory, explained Diego Aragon, Richard Peach and Joseph Tracy of the NY Fed.

As of March 2013, nearly 3% of all first-lien loans secured by one-to-four-unit residential properties were 90-plus days delinquent, essentially unchanged from the June 2012.

In contrast, the percentage of loans in foreclosure, which leveled off around 4% from 2011 through 2012, declined to 3.5% by early 2013, the report noted.

Underlying these national trends is a large disparity in performance between states that have a judicial foreclosure process and those that have a non-judicial foreclosure process.

The average number of days that a mortgage is 90-plus days delinquent at the time the foreclosure process is started is roughly comparable in judicial and non-judicial states.

A foreclosure in Florida begins when a lender files court action and records a notice of a pending lawsuit (Lis Pendens) against the borrower. The lender notifies the borrower and any other affected parties in person or in some cases by mail or publication. If the borrower does not respond to the court action within a specified amount of time, the county clerk can find the borrower in default and the lender can ask the court to make a final ruling. If the court rules against the borrower, the ruling will include the total amount owed to the lender and the foreclosure sale date.

The lender is not required by state law to notify the borrower before initiating the foreclosure process, but individual mortgages or deeds of trust might call for this. The borrower can stop the foreclosure up until the date of the sale by paying the total amount owed to the lender.

Notice of Sale / Auction

The sale date is typically 20-35 days after the court ruling, but this may vary depending on the individual court. The clerk of court issues a notice of sale containing the location, date, and time of the sale.  The notice is published once a week for two weeks, with the second notice appearing at least five days before the sale.

The clerk usually oversees the sale, which ordinarily occurs at the county courthouse at 11:00 a.m. on the sale date. The winning bidder must provide a 5-percent deposit and pay the remaining balance by the end of the day or a new sale is scheduled a minimum of 20 days later. After a successful sale, the clerk gives a certificate of sale to the winning bidder

Within 10 days of the sale, the clerk transfers ownership to the winning bidder if no one disputes the sale.  In most instances, a borrower has no right of redemption after the certificate of sale is issued.

Judicial states maintained higher foreclosure rates in early 2013, indicating the length of a loan remains in the foreclosure process in the judicial states is significantly longer than in the non-judicial states.

For instance, Florida, New Jersey and New York stand out as the most extreme examples of this occurrence, the report stated.

As a result, the large volume of loans in the foreclosure process in the judicial states appears to be impeding a home price recovery in those states.

The judicial foreclosure states have seen a more modest improvement in home prices since the trough for a given peak-to-trough decline in home prices.

"One potential explanation for this relationship is that potential homebuyers in the judicial states recognize that a large number of distressed sales have yet to occur, and this consideration has influenced the prices they are willing to offer for homes currently on the market," the NY Fed analysts concluded.

Florida still the top foreclosure state for first half of 2013

Florida once again led the nation in its foreclosure rate for the first six months the year, according to a report released Thursday by RealtyTrac, a California-based company that tracks foreclosed properties.

The Sunshine State had one foreclosure filing -- a default notice, scheduled auction or bank repossession -- for every 58 housing units in the first half of 2013. That’s an 11.5 percent increase over the same period last year and more than double the national rate.

The average foreclosure takes 907 days, the third-longest in the nation. But a new law designed to speed up foreclosures, HB 87, took effect this month. Now a Lender or an HOA can Foreclose in 45 days from notice of default.

Florida also has the top five metro area foreclosure rates in the country, and 12 out of the top 20. Miami is first with 2.35 percent of housing units with a foreclosure filing. Next is Orlando with 1.94 percent, Jacksonville with 1.91 percent, Ocala with 1.85 percent and Tampa with 1.74 percent.