RealEstateEconomyWatch.com

Word has reached us that the Treasury Department is reviewin the re-default numbers on modified mortgages it released last week after several observers questioned their accuracy.   

Shahien Nasiripour at the Huffington Post writes: 

The Obama administration has revised its latest monthly report on its signature foreclosure-prevention plan, deleting a heavily-criticized performance metric used to measure whether assisted homeowners are re-defaulting on their taxpayer-financed mortgages.
…
“Subsequent to releasing the report, Treasury received inquiries regarding the calculation methodology used in this table,” spokesman Mark Paustenbach said Tuesday. “These inquiries were related to the treatment of modifications that are cancelled from HAMP and ultimately become ineligible for TARP incentives after 90 days delinquency.

“In an effort to review and better explain the methodology, we learned from our program administrator, Fannie Mae, that not all cancelled loans were included in the underlying information provided to Treasury,” Paustenbach continued. “The error caused inconsistent reporting of permanent modifications during the snapshots reported. These omissions have impacted our previous analysis… with respect to the performance of HAMP permanent modifications.”
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In place of the now-deleted table, in a revised report posted Monday to their FinancialStability.gov Web site, Treasury said:

“Since the Making Home Affordable report was posted on July 20th, Fannie Mae, which administers the program, has reported to Treasury an issue in its implementation of the delinquency statistic methodology used to report performance of permanent modifications. Fannie Mae is now revising the data, and Treasury has retained a third-party consultant to provide additional review and validation. Upon completion of that independent review, a revised table will be provided.”.

Below is our original story.  We’ll post a new one whem the new data is available.

Despite the difficult economy and high unemployment rates, the vast majority of homeowners who modified their mortgages under the Administration’s Housing Affordable Modification Program (HAMP) are staying current on their payments, surprising experts and far exceeding previous modification efforts.

According to the Treasury Department, nearly three million borrowers have received restructured mortgages since April 2009, outpacing the 1.24 million foreclosure completions for the same period. Through June, 389,198 borrowers have received permanent modifications of their mortgages, which reduce monthly payments for a five year period to a level easier for borrowers to afford.

For borrowers who have had their mortgages modified 90 days months or longer, the percentage unable to make their payments is extraordinarily low. For permanent modifications, the redefault rate for loans 90 or more days delinquent is fewer than 2 percent at the time they are six months old.  Fewer than 3 percent of homeowners in permanent modifications at nine months have defaulted on their HAMP-modified loans.

Redefault results on the HAMP program are still preliminary.  Fewer than 5000 borrowers have been paying their permanently modified mortgages for more than 90 days, but results to date far exceed

By contrast, the Office of the Comptroller of the Currency (OCC) estimates the redefault rate of mortgages modified by the nation’s 11 largest servicers - incorporating proprietary mod programs - at 57 percent.

Within six months of the launch of the Bush era program, at a time when the economy was in much better shape, Hope for Homeowners over half of all modified loans were 30 days or more delinquent and over a third were 60 days or more delinquent

Last month a Fitch Ratings report predicted that most borrowers who have had their mortgages modified through a government-sponsored program will redefault within 12 months.  Between 65 percent and 75 percent of loans that are modified through the Home Affordable Modification Program but not backed by the federal government are likely to go bad, according to the report.

“Many of these borrowers still have very heavy levels of other debt,” said Diane Pendley, a Fitch managing director at the time.  “Auto loans, credit cards and other expenses. The HAMP modifications reduce housing expenses down to 31 percent of income but do not touch these other obligations.”

Unlike many previous efforts, HAMP modifications reduced principal as well as interests.  HAMP also included a three month trial period where borrowers must make modified payments on time.  To date, more borrowers have dropped out of the program during the trial period than have gone on to have their mortgages permanently modified.