21% HAMP First Year Redefault Rate

From Professor Adam Levitin on Credit Slips.

The Congressional Oversight Panel has a new HAMP report out. Like all COP reports, it’s long and chock full o’ analysis. There’s an executive summary up front, but some of the most important points are only in the report proper (especially pp. 100-111). I think there are three big things to take away from the report:

  • First, 21% of HAMP permanent modifications have redefaulted in their first year. That’s ghastly given that HAMP permanent modifications have an additional 3 months of trial seasoning and fairly serious payment reductions. The fact that Treasury hasn’t been reporting on this itself, much less analyzing the reasons for the redefaults is disgraceful.
  • Second, if past trends continue, starting this month, there will be more HAMP redefaults each month than new permanent modifications. That means that the total number of active permanent modifications will peak at around 500,000 and decline.
  • Third, it looks as if Treasury will only end up spending $4B for HAMP out of the $75B allocated for homeowner assistance.

My take: Treasury should shut down the program. At this point all it does it provide political cover for the failure to take meaningful steps to help homeowners and stabilize the housing market. But is anyone really buying it? …

The full article is here.