Mortgage servicers continue to modify 25,000 loans a month under the government's Home Affordable Modification Program (HAMP), but that pace could pick up later this summer as new changes to the effort kick in.
To date, servicers have completed roughly 930,000 modifications under the HAMP with 760,000 homeowners still current on those loans.
Recently unveiled changes could open the door for 1.5 million struggling homeowners (and real estate investors) to be eligible for a HAMP modification, according to analysts at Keefe, Bruyette & Woods (KBW).
Treasury is working on guidance to allow modifications of single-family loans on rental properties for the first time.
The new guidance will relax HAMP's debt-to-income cutoff, reflecting borrower obligations to make payments on second liens and medical bills. HAMP currently excludes borrowers with mortgage payments that are less than 31% of their income.
Treasury also is increasing incentive payments to investors, including Fannie Mae and Freddie Mac — when they agree to reduce the principal amount on a delinquent loans.
KBW managing director Bose George is skeptical the GSE regulator will allow principal reductions on Fannie/Freddie loans. However, principal reductions would make more underwater borrowers eligible for a HAMP modification.
Treasury wants to issue the new HAMP guidelines this month, but stronger modification results might not be seen until August or September.
"Treasury expects that homeowners may be evaluated under the new program beginning in May for trials starting June 1," the department said in releasing its December report on HAMP activities Monday.
The new HAMP report shows 79,300 borrowers are currently in payment trials. In December, 23,300 borrowers completed the three-month trials and were granted a permanent modification. In November, servicers completed 26,900 permanent HAMP modifications.