Sen. Ted Kaufman Introduces COP’s December Report

Some commentary from Adam Levitin via Credit Slips

21% HAMP First Year Redefault Rate

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?

Redefault Rates

Treasury has publicly estimated that the redefault rate on HAMP permanent mods will be 40% over five year. Now, just one year into permanent mods, we have already reached a 21% redefault rate. There is no indication that the redefault rate is plateauing, and no reason to think that it will.

My own personal prediction: over 5 years we will see redefaults in the range of 60-80% on HAMP permanent modifications. I hope I’ll be proven wrong. But given the current state of affairs, I think we will see only 100k-200k permanent modifications still performing at the end of 5 years, a far cry from the 4 million homeowners the Administration said the program would help. (Unless by “help” you mean delayed foreclosure by a few months). The number of permanent modifications that do not redefault is the most fundamental metric by which to evaluate HAMP on this metric, it is an epic fail, topped only by Hope 4 Homeowners.

You can check out Levitins original post in its entirety here…

Full COP report below…



Congressional Oversight Panel December Oversight Report