Two days, two articles, two different viewpoints. If you listen to NPR, you may have heard the segment on the "troubled Obama mortgage program." If you read MarketWatch, you may have read that loan modifications are on a sharp rise. So, which one is right? Oddly enough, both are pretty accurate once you filter out the spin.
After the jump, I attempt to do just that.
According to NPR, 1.24 million borrowers have enrolled in the Obama administration's HAMP program. Of those 1.24 million, 436,000 have dropped out of the program for one reason or another. In May 2010, 155,000 left the program. Given these numbers, it sure looks dismal.
On the other hand, MarketWatch reports that in the first quarter of 2010, 136,00 borrowers received a permanent modification as a result of the program. In the fourth quarter of 2009, only 43,000 borrowers converted to permanent modifications. That certainly seems promising, doesn't it?
How can both of these bits of information be correct and not contradictory? It truly boils down to the (G-rated version) of the old adage about lies: There are three kinds of lies -- lies, darn lies, and statistics. We can probably locate the truth somewhere in the middle.
For every success story that we can trace to the HAMP program, there will also be failures that make the program seem utterly ineffectual. Plenty of borrowers fall into the cycle of umpteen trial modifications that ultimately end in having a permanent modification denied. Sometimes, these denials are due to the size of the bank and the volume of files it is handling. They just aren't that organized and people frequently fall through the cracks.
Pursuing a loan modification is an exercise in diligence. Our loss mitigation staff spends the entire day holding on the phone with banks, faxing paperwork to banks, and generally herding cats. Banks frequently request the same information multiple times.
It is all a part of the Kafkaesque process of dealing with large lending institutions.
So, at the end of the day, who is right in this analysis? I would argue that both NPR and MarketWatch (which is simply reporting disclosures from the government) present a clear picture of the situation. Although the number of people who have successfully converted to permanent modifications has risen, a significant number of people also fail to grab the brass ring that is a permanent modification.
Even some permanent modifications fail, especially when borrowers are swamped by other debts.
My take on this is that we are nowhere near out of the woods yet. Foreclosures are still being filed at a rapid pace. Many people don't know their options and simply throw up their hands in frustration. What we need are more honest people working to help borrowers work out a resolution for their debts.
