The percentage of HAMP modifications completed by mortgage servicers fell 10% in July from the prior month while the percentage of proprietary restructurings rose 11%, according to new government figures.
The Treasury Department reported late this week that servicers completed 28,300 modifications (including 2,328 with principal reductions) that met the specifications of the government's Home Affordable Modification Program. Servicers completed 31,600 HAMP modifications in June.
The HOPE NOW servicer alliance reported on Wednesday that its members completed nearly 55,700 proprietary modifications in July compared to 50,300 the prior month.
“We are happy to see an increase in permanent proprietary loan modifications for the month of July," said Faith Schwartz, executive director of HOPE NOW. "More encouraging is the significant drop in foreclosure sales and starts, which is directly related to the extraordinary amount of work that is being done to educate at-risk homeowners about their options.”
The HOPE NOW monthly report shows foreclosure sales fell 11% and foreclosure starts fell 5% in July from June. (But the percentage of loans 60 days or more past due rose 2% during July.)
Servicers are required to evaluate at-risk borrowers for a HAMP modification first before moving borrowers into a proprietary restructuring. Approximately 60% of proprietary mods reduce principal and interest payments by 10% or more, according to Hope Now.
HAMP provides servicers with incentive and performance payments to make larger reductions in a borrower's mortgage payments.
The median monthly savings for nearly 675,500 borrowers with a HAMP modification is $525 or 37% of the median monthly payment before modification, according to Treasury.
Meanwhile, Treasury has been policing servicers to make sure they comply with HAMP guidelines in terms of contacting delinquent borrowers, evaluating borrowers for assistance and program reporting.
Treasury took its first disciplinary action in June and began withholding incentive payments to Wells Fargo, Bank of America and JPMorgan Chase after finding these servicers needed to make "substantial" improvements to comply with HAMP standards.
On Thursday, Treasury said Wells Fargo had corrected "identified deficiencies" and it would no longer withhold incentive payments. However, Treasury still wants Wells Fargo to make further improvements.
The department placed the Des Moines-based servicer in its "moderate improvement needed" box along with American Home Mortgage Servicing, CitiMortgage, Ocwen Loan Servicing and Select Portfolio Servicing.
Currently, Treasury is withholding incentive payments to B of A and Chase.