Principal Reduction Not the only HAMP Component with Little Activity from the GSEs
February 7, 2012
Mortgages owned by Fannie Mae and Freddie Mac account for 51.8 percent of the 842,146 active trial and permanent modifications completed via the Home Affordable Modification Program. However, the government-sponsored enterprises’ share of HAMP’s short sale activity is much smaller, at 5.8 percent, according to new disclosures by the Treasury Department.
As for the end of 2011, 27,665 Home Affordable Foreclosure Alternatives transactions – the vast majority of which are short sales, though deeds-in-lieu of foreclosure are also allowed – have been completed since the program took effect in April 2010, including 1,604 by the GSEs. Some 18,350 HAFA transactions have been allowed on mortgages in non-agency mortgage-backed securities along with 7,711 on mortgages held in portfolio.
HAFA incentives include a $3,000 payment to borrowers for relocation expenses, $1,500 for servicers, and up to $2,000 in payments to subordinate mortgage lien holders of in exchange for a release of the lien and the borrower’s liability. All HAMP servicers must consider borrowers denied a HAMP mod for a short sale or deed-in-lieu of foreclosure via HAFA.
However, individual investors can impose additional eligibility requirements.
“Both Fannie Mae and Freddie Mac issued investor-specific guidance surrounding HAFA policy,” the Treasury noted. “For example, Freddie Mac HAFA guidance excludes homeowners who have a current offer on the home.”
The Treasury has also modified HAFA numerous times since its initial implementation. “To date, neither GSE has formally adopted this expanded eligibility criteria for their respective HAFA programs,” the Treasury noted.
Among the 10 largest HAMP servicers, five have completed at least 1,000 HAFA transactions, led by JPMorgan Chase Bank with 10,357 as of the end of 2011. CitiMortgage has the least HAFA activity among large servicers, with 29 transactions.
Meanwhile, the largest HAMP servicers have a total of 157,960 non-HAMP short sale and deed-in-lieu transactions in progress for borrowers denied HAMP mods and those with cancelled trial HAMP mods. Citi, for example, had 2,515 non-HAMP short sales and deeds-in-lieu of foreclosure in progress for HAMP-related borrowers as of the end of 2011.
“The greater volume of activity outside HAFA may be explained, in part, by the fees and deficiency judgments that servicers are able to collect from the borrower in non-HAFA transactions, which are not available within HAFA,” the Special Inspector General for the Troubled Asset Relief Program said.
For more analysis of the latest HAMP performance and a ranking of the top non-agency HAMP servicers, see next week’s issue of Inside Nonconforming Markets.
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