08/12/2010

When the Trea­sury Depart­ment released its lat­est progress report for the Home Afford­able Mod­i­fi­ca­tion Pro­gram (HAMP) in late July, it showed the redault rate­for per­ma­nently mod­i­fied loans to be around the two per­cent mark – 5.9 per­cent 60 or more days past due after mod­i­fi­ca­tion, and 1.7 per­cent 90 or more days delinquent.

An out­cry from ana­lysts – and some of you dis­cern­ing DSnews.com read­ers – imme­di­ately fol­lowed, ques­tion­ing the valid­ity of the government’s math.  Within a few days, the Trea­sury had pulled those num­bers from its online reports and replaced them with the fol­low­ing state­ment: “Since the July 20th release of the HAMP report, pro­gram admin­is­tra­tor Fan­nie Mae has reported an issue in its report­ing of per­ma­nent mod­i­fi­ca­tion per­for­mance. Fan­nie Mae is revis­ing the data, and Trea­sury has retained a third-party con­sul­tant to pro­vide addi­tional review and inde­pen­dent val­i­da­tion.”  Last week, the Trea­sury qui­etly and stealth­ily cor­rected its rede­fault assess­ment. The revised num­bers are that 10 per­cent of six-month–old per­ma­nent mods are 60-plus days delin­quent, and 6 per­cent are 90-plus days delinquent.

Research ana­lysts say that’s still too low and the rede­fault rate will surely go higher the longer the pro­gram is in place. Up until six months ago, per­ma­nent mod­i­fi­ca­tions had been offered to just about 100,000 borrowers.

The ana­lysts at Bar­clays are pre­dict­ing a 60 per­cent rede­fault rate over HAMP’s life­time. A sep­a­rate study by Fitch Rat­ings projects 55 to 75 percent