The Treasury Department's March report on the Home Affordable Modification Program (HAMP) provided ‘more evidence that the root causes of homeowner defaults have yet to be addressed,’ according to a statement from the Association of Mortgage Investors (AMI).
On Wednesday, the Treasury released its latest HAMP progress report, which showed that more than 60,000 trial modifications had been converted to permanent status in March, bringing the total number of permanent modifications to about 230,000.
The report also showed that the median back-end debt-to-income ratio (DTI) for HAMP borrowers post-modification is 61.3% – down from a median pre-modification back-end DTI of 77.5%.
"This number is trending the wrong way," Micah Green, an attorney with law firm Patton Boggs LLC, says in a statement on behalf of the AMI.
"Any solution will be incomplete if it does not give homeowners a way to reduce debt payments on all of their obligations," Green continues. "This is why AMI supports shifting away from a short-term modification plan toward a principal reduction/refinancing plan that has first and second liens participating in a program that will help the homeowner afford their mortgage and help rebuild equity – with the end goal of keeping them in the home."
The AMI was also represented at a hearing this week before the House Financial Services Committee's Subcommittee on Housing and Community Development. Vincent Fiorillo, a member of Los Angeles-based Doubleline Capital's MBS portfolio management and trading department, testified in favor of modifications that reduce loan balances on all property liens. He also spoke in support of the framework of the Federal Housing Administration's (FHA) recent announcement to reduce principal through a refinancing program for borrowers in negative-equity positions.
"Mortgage investors believe that the administration's newly announced program for principal reduction leading to an FHA refinancing program is an important step forward," Fiorillo's prepared remarks state. "However, with the current lack of detail, investors are extremely worried that there are significant execution risks to the program that are similar to some of the experiences that we have seen in the current HAMP program. This program will need clear instruction to servicers that participation of both first and second liens in the principal reduction/refinancing program is necessary and must take priority over other options that are in the servicer's self interest, but harmful to homeowners and investors."
SOURCE: Association of Mortgage Investors