PERSON OF THE WEEK: Earlier this month, HOPE NOW reported that servicers executed about 1.76 million loan modifications for borrowers in 2010. That total included about 1.24 million proprietary loan mods and 512,712 Home Affordable Modification Program (HAMP) mods. To get a better understanding of the fourth-quarter 2010 data, as well as the relationship between the government program and servicers' voluntary loss mitigation efforts, MortgageOrb.com recently caught up with Faith Schwartz, HOPE NOW's executive director.
On proprietary modifications falling in the last three months of 2010: I think a few months do not necessarily make a trend, as we finished a pretty strong year on proprietary mods, as you can see from our data. I think we're clearly working through pipelines that have been pretty delinquent – we know that. We also know that at the end of the year, we had about 2.87 million people who were 60 days late on their payments, versus 4 million people who were severely delinquent a year ago.
Toward year-end, there were a fair number of disruptions in the processes, in general, including pauses and holiday disruptions on foreclosure sales, as well as some activity while some of the major players reviewed their pipelines and activities to make sure their processes were in line. Last quarter's data is probably not as representative as the first or second quarter's data.
On HAMP's impact on proprietary modifications: I think the government program did introduce significant protocol and uniformity to the market. I know that because I worked with the market before and after [HAMP was introduced], and it's clear that the process of lowering rates, extending terms where appropriate, and deferring principal or writing it off is largely a complex effort.
So by getting the industry together, HAMP's pull-through effect onto other modifications, industry standards, safe harbor, etc., is really quite strong.
I give [administrators] a lot of credit for unifying the process. They should get that credit, because before [HAMP], no one could say easily what exactly the mods were. And we saw some higher redefaults, so clearly, we've seen some better performance on more aggressive terms.
On proprietary modifications' redefault rates: I don't think we have a full information set on where that's performing, but based on what we're seeing today, versus what we saw two years ago – with the types of mods changing quite dramatically – my anticipation is that rates will be far improved from where they were before.
On efforts to end HAMP before its 2012 sunset date: One thing that's been fortunate is that the proprietary mods, for the vast majority of the servicing market, come after HAMP. There's a very logical waterfall. I think we've been beneficiaries of a process and a standard protocol that's required today.
Because of that, I think we get a lot of pull-through, and I think it'd be a mistake if [HAMP] were no longer in the market. I think it's provided a benefit and, frankly, a fairly inexpensive benefit to taxpayers, because it's not costing nearly the dollars that were allocated, but it had some structural impact on the market.
On short sales in 2011: I think we have to introduce short sales more and earlier in the process. If we could have a little-less-drawn-out process, the short sale/deed-in-lieu – while people don't love them – are still better than foreclosure, and they need to be introduced at an earlier stage as an alternative. At the end of the day, it's foreclosure avoidance. Of course, staying in the home is the number-one opportunity.
I think we have to make sure people are doing what's best for themselves, for their communities and for investors. I suspect we'll continue to see a lot of focus on the short sale as another meaningful option for homeowners, and it could be used a little more effectively.
