IN-HOUSE, "PROPRIETARY" LOAN MODIFICATIONS ON THE RISE SINCE 2012 FORECLOSURE SETTLEMENT

By Chris Qualmann

Much has been said about the rise in loan modifications finally coming to completion through programs like the government's “Home Affordable Modification Program” (“HAMP”). However, since the 2012 “National Foreclosure Settlement" with major banks, the Department of Justice and 49 State Attorney General’s Offices, the number of “non-government”, private loan mods being completed (and designated “permanent”) also has increased sharply, according to a government report.

Per the U.S. Office of the Comptroller of the Currency (“OCC”), the number of finalized, permanent modifications under “non-government” programs (sometimes called “in house” or “proprietary” modifications) climbed 22 percent in the months immediately following the announcement of the Foreclosure Settlement.

Pursuant to this agreement (which was the result of an investigation into fraudulent foreclosure practices), the five (5) largest U.S. loan servicers, including Bank of America, JPMorgan Chase & Co., Citimortgage, Wells Fargo and GMAC agreed to a $25 billion settlement that required them to provide far greater assistance, and new, "private" programs to delinquent homeowners.  As stated by Bruce Krueger, a senior mortgage expert with the OCC, “Under the settlement, more people will be getting a modification.”

Notably, the Settlement has not only fueled a rise in the number of completed, “permanent” non-government modifications ... but also the number of “trial” non-government modifications.  The OCC reports that proprietary “trial” modifications jumped 74 percent in the quarter following the execution of the Settlement – representing a 50 percent increase from the same time period a year earlier, in 2011.

Lenders have struggled to find ways to reduce losses as more than 11 percent of mortgages were delinquent or in foreclosure as of the middle of 2012. The percentage of mortgages that were current and performing at that point was 88.7 percent, compared with 88.9 percent the previous three months and 88.1 percent a year earlier, according to the OCC.