Sunday, December 6, 2009

More on Mods

The HAMP mortgage mod fiasco is the single biggest reason there are few homes on the market right now. This is the king pin of the Obama save the home owners plan. So how is it working?

Not so good. Overall something like 25% are already behind. The longer they have been enrolled the higher the percentage of late pays. After 3 months it's closer to 50%. The delinquency rate show the epic failure of this plan. Yet the administration thinks the answer is to pressure the lender to offer more mods and make the mods more affordable.

An example of just how epic a failure this plan is comes from JP Morgan. They have initiated around 178,000 mods. Of that 178k, 22% of them didn't even make the first payment! Even the treasury expects the re-default rate to be 40%. Unfortunately that estimate is proving optimistic as the actual number is looking more like between 50% and 60% (after a year). According to one study, even with payments cut an average of 34%, 65% of borrowers fell back into delinquency. So if we are cutting payments 34% and people still can't pay.......where do you go from there. How about a 30 year loan, payments of $1 a month with a balloon for the balance at the end. I bet that one gets a 100% success rate!

It's fairly obvious people are using this plan to get more free time in the home. They get another 3 to 6 months under the mod, then the bank starts the foreclosure process again and that takes another 6 to 9 months. If they can initiate a short sale they might even be able to squeeze 3 or 4 additional months out if it. That could mean another year to 18 months of free living.


Max said...

Hey, Golfer_X.

Just wanted to leave a note to say how much I enjoy reading your blog. I've been reading for over a year, and I really appreciate the legwork you do finding these delusional sellers.

Keep up the good work!


golfer_X said...

Thanks Max, I was beginning to wonder if there was anyone still out there!

golfer_X said...

One more set of numbers came out today concerning mods. B of A has announced that 2/3 of the people signed up for trial mods have not turned in the required paperwork to make those mods permanent. TWO THIRDS!

Leti said...

Ditto, I read constantly even if commenting rarely! Keep it up.

Todd said...

I'm still here too! I look at least once a day to see if anything new has been posted.

golfer_X said...

JP Morgan has released their numbers.

200,000 mods
just over 4000 were made permanent
29% failed to make all the payments
Another 51% failed to supply the required paperwork. That leaves about 36,000 mods that MIGHT become permanent. The best they are going to do is 20% or about 40,000 out of 200,000. That's not so good but then again I didn't expect much better.

Joan said...

I've been away, but I used to read a lot without commenting, and now that I'm thinking about buying again in a year or two, I'm back. I'm not even on the west coast but still find your commentary valuable & refreshing. Keep up the good work!