HAMP’s momentum appears to be slowing, as permanent modification growth slows and the number of trial modifications decreases more sharply. Chicago region permanent loan modifications rose by 9 percent from June to July, compared to 15 percent growth from May to June and 17 percent growth from April to May (see charts A and B). Regional trial modifications fell by 30 percent from June to July, which is the third month in a row of month-over-month losses above 20 percent. Total modification activity in the Chicago region fell by 9 percent from June to July.
Similar trends can be seen nationally. Trial modifications also dropped by 30 percent from June to July, and permanent modifications grew by 8 percent—slightly less than the 9 percent growth in the Chicago region. Nationally, total modification activity fell by 10 percent from June to July.
As we noted in past months, the falling numbers of active modifications are likely due in part to the fact that many servicers did not require full income documentation before starting a trial modification; borrowers who do not qualify based on income are now being dropped from the program. Additionally, Treasury now requires that all servicers collect full income documentation before starting a trial modification, likely slowing the rate of new trial modifications.
Compared to the 10 metropolitan areas with the highest HAMP activity, Chicago is fifth in terms of percentage of all active HAMP modifications that are permanent, with permanent modifications comprising 63.2 percent of all active modifications. This is higher than the national average of 62.2 percent of all active modifications being permanent (see charts C and D below).
However, within the context of continually decreasing numbers of active modifications, this ratio does not indicate how well metropolitan regions are performing in terms of converting trial to permanent modifications. For instance, more than 16,000 modifications in the Chicago region have been cancelled since the February peak of 51,301 active modifications. The ratio of permanent to all active trial modifications continues to increase by virtue of the decreasing number of all active modifications. Since Treasury does not currently release regional data on all modifications that have been started (including those that have been cancelled), we cannot accurately assess the Chicago region’s conversion rate.