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14-percent of Wells Fargo trial modification customers fail to make all three payments

14-percent of Wells Fargo trial modification customers fail to make all three payments

At Wells Fargo & Co., about 14 percent of the customers who make one payment in the trial loan modification phase don’t end up making all three to qualify for a permanent reduction, said Mike Heid, co-president of Wells Fargo Home Mortgage in San Francisco.

“About half of the customers who end up making all three payments end up in a permanent modification,” Heid said. “Another 25 percent are just not eligible.”

Across the board 25-percent of borrowers in the HAMP trial program fail to make their new payments

At least 196,000 borrowers have missed some or all of their required payments, according to comments Treasury officials made on a conference call today and calculations from government data.

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An additional 115,000 homeowners who started trial repayment plans last year have either dropped out or been kicked out of Obama’s Home Affordable Modification Program, the officials said.

High unemployment pointed to as cause of failure rate

“None of these programs have really been a success,” said Vivek Sriram, a mortgage strategist for RBC Capital Markets in New York. “With the high unemployment rate, it’s tough to solve the problem because these people will redefault even if their loan terms are fixed.”

The U.S. has shed 7.2 million jobs since the recession began in December 2007, with almost half those losses occurring after Obama took office in January 2009. The HAMP mortgage program, which Obama said would target as many as 4 million Americans struggling to hold onto their homes, has successfully modified 66,465 loans as of Dec. 31, according to data released today by the Treasury.

Government is considering principal reductions among changes to improve the program’s performance

Michael Barr, the assistant Treasury secretary for financial institutions, said the government is considering changes to improve the program’s performance, such as permanently cutting outstanding loan balances where borrowers owe more than the property is worth.

“We are in the process of reviewing that now as we have been continually through the program,” Barr said on the conference call. “You have to be very careful not to design a program that would change people’s behavior across the country in a destabilizing way.”

Obama has set aside $75 billion to subsidize lenders that successfully modify troubled loans by reducing interest rates, extending loan repayments, deferring principle payments for as long as five years and adjusting other mortgage terms.
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Source: http://www.bloomberg.com/apps/news?pid=20601087&sid=aBE9Z4fJhiAg&pos=6

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