For the past year, we've been digging into the administration's fumbling efforts. We've crunched a lot of numbers along the way, and now we're sharing what we found – including loads of previously unreported data.

Using new Treasury Department figures, previously unreleased documents obtained through Freedom of Information Act requests, and new analyses of state and industry data, we have assembled the most detailed look yet at how the the mortgage industry and the government's main effort, the Home Affordable Modification Program (HAMP), have failed homeowners. It provides crucial context to the ongoing government investigation into mortgage servicing practices, which might lead to reforms of how banks and servicers handle homeowner requests for modifications.

Here's what we learned:

 

Only a fraction of struggling homeowners are getting help.
 

Total Pool of Delinquencies

Total Mods Each Month

(Source: LPS Applied Analytics and HOPE Now)

The number of modifications each month has remained dramatically lower than the number of homeowners behind on their mortgages.

Although Treasury Department officials and mortgage servicers claim the industry has gotten better at handling modifications, the average rate of modifications in the past two years is not significantly different than the rate before HAMP launched.

The data for the total number of modifications provided by mortgage servicers comes from HOPE Now, an industry-headed coalition.

 

Mortgage servicers are reaching only a small fraction of struggling homeowners.
 

Percent of deliquent homeowners in contact with servicers


(Source: State Foreclosure Prevention Working Group)

Ideally, servicers would be in contact with troubled borrowers, discussing possible alternatives to foreclosure. But servicers aren't doing that with most homeowners at risk of foreclosure-and they haven't improved much. Servicers generally have multiple alternatives to foreclosure, including modifications, short sales and deeds in lieu, all of which are generally better outcomes for both homeowners and investors.

“If you have names, addresses, and phone numbers for your customers, it seems like you ought to be able to do better than reaching one out of three,” said Mark Pearce, formerly North Carolina deputy commissioner of banks.

The data for the above graphic comes from the State Foreclosure Prevention Working Group and covers 11 mortgage servicers that collectively handle about 35-40 percent of mortgages and a majority of subprime loans. The data show what percentage of homeowners who are more than two months behind are in discussions with their servicer about a possible foreclosure alternative.


The largest servicers, especially Bank of America, have left most struggling homeowners hanging without either modifying or foreclosing.
 
0% 25% 50% 75% 100%

Percent of seriously delinquent mortgages that have been...

Modified Unresolved Foreclosed

(Sources: Moody's, ProPublica analysis)

A homeowner's chance of getting a modification depends a lot on which company services the loan. In an analysis by Moody's, Bank of America fared worst of all, providing less than half as many modifications as Ocwen, which specializes in servicing troubled loans.

The above chart is based on an analysis we did of Moody's data on 300,000 subprime loans that had been more than three months behind in the last year or so. All had been packaged into mortgage-backed securities.

Moody's also reported that getting a modification takes several months at all of the servicers, though some were worse than others. The worst was JPMorgan Chase, where the average modification occurred 11 months after the borrower fell behind. At Ocwen, the fastest, it was seven months.

As you can see, the vast majority of subprime delinquencies at Bank of America, the nation's largest servicer, haven't been resolved either way. About 41 percent of Bank of America's loans in this analysis hadn't even begun the foreclosure process, despite an average delinquency of 13 months. Another 27 percent of homeowners were in foreclosure but hadn't yet lost their homes-the average delinquency there is two years.


HAMP hasn't led to an increase in modifications.
 

Non-HAMP Mods

HAMP Mods

Average

HAMP Delays Mods

(Source: HOPE Now)

Though HAMP was designed to make it easier for homeowners to get modifications, most of the people who applied when the program was launched in April of 2009 waited months for an answer. The result was a steep decrease in overall modifications. As that backlog was addressed, modifications temporarily increased but then returned to their pre-HAMP levels. Just before HAMP launched, there were about 125,000 loan mods per month. Since the program launched, there have been on average 125,000 mods monthly, including HAMP mods.


Just over one in five homeowners who applied for a HAMP mod have received a permanent modification.

 

Number of Homeowners

(Source: Treasury Department, ProPublica analysis)

About 1.3 million homeowners who have applied for a HAMP mod were denied without being placed in a trial, a three-month period that is supposed to give homeowners a chance to show they can afford the new payments. Meanwhile, getting placed in a trial is just the beginning of a disappointing process for many homeowners: More than half of trials were canceled, most of the time despite the fact that the homeowner had made all of the payments. Trials have also frequently lasted far longer than the three months they are supposed to last. About six percent of those who'd applied were in a trial as of December.

The data, which covers through December, actually undercount the number of homeowners who have sought help, because it only includes loans where the servicer says it has responded to a homeowner's HAMP application - about 2.7 million homeowners. There are no records for the many people who have applied but, often after months, not heard back from their servicer.


Mortgage servicers, notorious for losing documents, cited missing documents in a quarter of rejections.

 

Percent of Rejections

(Source: Treasury Department, ProPublica analysis)

In total, two million homeowners have been rejected from HAMP as of December: 1.3 million were denied even a trial modification and about 700,000 more had their trials cancelled.

The most common reason servicers cite for denying a modification has been that the required documents are missing or incomplete. Almost a quarter of rejections were for this reason. This occurred against the backdrop of widespread reports of servicers' inability to reliably keep track of documents. That means that many of those 460,000 homeowners may have been wrongly denied because the servicer lost their documents.

Over 500 homeowners have told ProPublica via a questionnaire that the servicer lost their documents. At least 300 times, homeowners were told they hadn't supplied required documents that the servicer had never actually asked them for.

Note: HAMP defines an "affordable" monthly payment as 31 percent of the borrower's gross monthly income.


So, you've applied for a loan mod: What are your chances of getting it with your servicer?

The eight largest servicers: Here's what happened to applicants, as of December 2010:
No mod Waiting Got a mod
Denied Trial cancelled Currently in a trial mod Non-HAMP mod HAMP mod
American Home Mortgage Servicing 23% 2% 11% 37% 28%
Bank of America 29% 24% 8% 20% 19%
CitiMortgage 36% 18% 3% 24% 19%
GMAC Mortgage 53% 4% 2% 21% 19%
JPMorgan Chase subsidiaries 44% 9% 4% 29% 14%
Litton Loan Servicing 43% 10% 2% 33% 12%
OneWest 47% 10% 4% 17% 22%
Wells Fargo 31% 15% 5% 30% 20%

(Source: Treasury Department)

These are the breakdowns for the largest eight servicers.

Denied: You didn't get a HAMP mod. You may have lost your home to foreclosure, sold your home through a short sale, or you might simply be waiting for further action from your servicer, including a possible offer of the servicer's in-house modification.

In a trial mod: You're in the program's trial period, making payments to show you can afford your home with a HAMP mod. The trial is supposed to last three months but usually lasts longer. From here, you'll either end up with a HAMP mod or your trial will be canceled. If that happens, your servicer may still offer you a non-HAMP mod.

Trial canceled: You were denied a HAMP mod, either because your servicer decided you didn't meet the program's requirements or, less likely, because you didn't make the trial payments. You may have lost your home to foreclosure, sold your home through a short sale, or you might simply be waiting for further action from your servicer, including a possible offer of the servicer's in-house modification. Advocates say it's worse for a homeowner to be rejected after making months of trial payments than to be rejected up front.

Non-HAMP mod: Your servicer rejected you for a HAMP modification but has offered you an in-house modification. These mods generally are less affordable than HAMP mods.

HAMP mod: Your servicer offered you a HAMP mod.

Left in limbo: You might not fit into any of these categories, since servicers have struggled to process homeowner applications: Many homeowners, for example, go several months without getting any kind of response. As we've noted earlier, this data, provided by the Treasury, only includes loans where the servicer says it has responded to a homeowner's HAMP application. There are no records of how many people fall into that category.


Treasury claims servicers are improving, but its own data show otherwise.

 

Complaints as percent of calls to HOPE Hotline

(Source: HOPE Hotline)

Treasury officials-most recently, HAMP chief Phyllis Caldwell in congressional testimony in December-have cited the complaint data from a Treasury-sponsored hotline for homeowners to support their claim that servicers are getting better. Treasury officials generally point to decreases in certain narrow categories of complaints. But that obscures the general upward trend of complaints and sharp increases in the most common complaints, which are related to servicers wrongfully denying homeowners modifications.

Over the past year, Treasury Department data, obtained through a Freedom of Information Act request, indicate that homeowner complaints about mortgage servicers are increasing. Complaints are calculated as a percentage of total calls (excluding irrelevant calls like hang-ups and wrong numbers).

The Treasury Department's log of complaints is also almost certainly an undercount. Known as the HOPE Hotline, it has not been advertised to homeowners as a place to lodge complaints about their mortgage servicer. In fact, many homeowners don't know where to go to complain. When people do call, hotline operators do not solicit complaints but only record them if they are volunteered by the homeowner. Additionally, when a homeowner calls with multiple complaints (i.e., the servicer lost their documents and wrongfully denied them), only one is recorded. Logged complaints must fit into specific categories, and Treasury only added certain important ones in March of 2010, eight months after they began collecting the data.

A Treasury spokeswoman said that the increase in complaints was likely because there had been an increase in the number of homeowners denied modifications in 2010. According to program rules, homeowners are supposed to receive a denial notice that includes the hotline number. Many homeowners were denied after spending several months in prolonged trial modifications.


Overall, mods are more affordable, even including non-HAMP ones, though their terms are still less generous than HAMP.

 

Payments decreased 20% or more

Payments decreased less than 20%

Payments unchanged or increased

(Source: OCC and OTS Mortgage Metrics Report)

Before HAMP, most modifications left homeowners' monthly payments unchanged-or even increased them. HAMP mods have affordability guidelines, which, for those lucky enough to actually get one, generally lead to a sharp decrease in monthly payments. There's also evidence that HAMP has had a positive impact on the terms of modifications that servicers have offered outside the government program. Those non-HAMP mods, which outnumber HAMP mods, are now more likely to lower payments, but not as much as HAMP mods. According to recent government statistics:

  • HAMP mods last year decreased homeowner payments by an average of $585
  • non-HAMP mods reduced them by an average of $332

Instead of mods, servicers have recently been offering more repayment plans, which actually increase struggling homeowners' payments.
 

Repayment Plans

Total Mods

(Source: HOPE Now)

In a return to its pre-HAMP practices, the mortgage industry has increasingly been putting homeowners who fall behind into repayment plans instead of modifications.

In a repayment plan, the homeowner catches up on missed payments by paying a portion of the past due amount each month on top of their regular payments. This is typically done over three to six months and is a far more difficult option for struggling homeowners than a modification, because it imposes an additional burden. Modifications actually change the terms of the loan forever and typically lead to a reduction in monthly payments. Government statistics show that homeowners are twice as likely to re-default if the plan they're offered increases their mortgage payment than if their payments are significantly lowered.

“Repayment plans have always been what the industry has favored,” said Diane Thompson of the National Consumer Law Center, because it's easiest for the servicer. “Nobody takes a permanent hit, it's easy, quick, doesn't require new underwriting, doesn't require much thought.”

Before HAMP, most solutions offered to homeowners were repayment plans. That changed for most of 2010 due to HAMP's emphasis on mods as a solution, but now with new applications for HAMP winding down, servicers are returning to their preferred solution.


Most funds set aside to help homeowners are still unused.
 
$0 $30 billion

Unspent

Spent

(Sources: Treasury Department, ProPublica)

The Treasury Department set aside more than $37 billion from the TARP for two programs meant to help struggling borrowers, but little more than $1 billion has been spent.

HAMP has used so little of its funds for a couple of reasons. It provides incentives for mortgage servicers, investors and homeowners only for completed modifications, but the program has achieved relatively few. Also, the incentives are paid out over five years for each loan. In a report in December, the Congressional Oversight Panel estimated the Treasury would ultimately spend only about $4 billion.

About $7 billion was set aside for the Hardest Hit Fund, which provides subsidies to states for various foreclosure prevention programs. That, too, has been slow to get off the ground. Only $104 million has been spent so far.

You can see all of this data, broken down by state and servicer, in our bailout database.