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Servicers Modify Nearly Half of HAMP Eligible Second Liens

By Jon Prior, Housingwire.com

Mortgage servicers participating in a Treasury Department program to modify second liens provided workouts on roughly 47% of all such eligible loans through November.

Fannie Mae directed its servicers to begin modifying mortgages through the 2MP initiative in January 2011. The servicers can elect to modify the second lien or fully extinguish it. Treasury guidelines require a servicer to offer a second-lien mod to any borrower in an active permanent modification on the first lien. The second must have an unpaid principal balance of at least $5,000 and a monthly payment of at least $100 before the workout.

Only six of the top 10 HAMP servicers participate in the voluntary program, including Bank of America, Citigroup, Ally Financial, JPMorgan Chase and Wells Fargo

These five servicers started modifications on 94% of the 54,828 second-lien mods under 2MP. According to the Treasury, more than 115,000 second liens are eligible for the program as of November.

Servicers are notified by Treasury if a second lien matches up with a HAMP first-lien modification. More than 308,000 matches have been reported, but canceled or failed trials eliminate most of them.

Of the more than 54,000 second-lien mods, nearly 10,000 were fully extinguished. The median amount of extinguished second liens was $60,688.

Not surprisingly, 35% of the 2MP activity occurred in California. The next closest was Florida at 9%.

Servicers started 26,877 permanent mortgage workouts through the Home Affordable Modification Program in November, pushing the total past 909,000 since the launch in March 2009.

The much criticized program expires at the end of 2012 and has averaged between 25,000 and 30,000 permanent modifications per month for the past year. Should the current pace continue through the end of 2012, the amount of workouts could move higher than 1.2 million. That's well short of the 3 million to 4 million originally estimated and also before redefaults are factored in.

According to the Office of the Comptroller of the Currency, 17% of the 108,000 HAMP modifications began in the second quarter of 2010 went 60 or more days delinquent within one year. That's compared to a 31% redefault rate for other private programs.

The Congressional Oversight Panel estimated last year that HAMP would total roughly 800,000 completed permanent modifications that avoided redefault.

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