I can tell you from the frontlines of the foreclosure crisis, that the Obama administration's Home Affordable Modification Plan or HAMP is a large scale failure.  Consider these facts from the ACORN and the Center for Responsible Lending: 

-A family loses their home to foreclosure every 13 seconds.

-15 million homeowners owe more than their mortgages are worth.

-9 million foreclosures by the end of 2012 resulting in a $2 trillion loss in home property values in the United States.  With millions of option ARMs and Alt-A loans scheduled to reset in the next few years, coupled with rising unemployment, the projected numbers are likely to only get worse. 

"Mortgage servicing companies are key to addressing the foreclosure crisis because they occupy the unique niche of collecting payments and making decisions about foreclosures on behalf of investors who own pools of mortgage backed securites.  Unfortunately, most workouts offered by servicers are not aff ordable to the homeowner, and many even fail to lower the monthly payment that led to the delinquency, thereby resulting in high re-default rates." 

Source:  http://financialstability.gov/docs/report.pdf

Go this link and find specific loan mod performance results on your loan servicer.

The charts on page 5 of the the HAMP Modification Activity by Servicer shows the relative performance of the top 20 loan servicers that have signed up for the HAMP loan modification program. 

Companies typically do not own the loans that they service.  The loans are owned by mortgaged backed security trusts referred to as "private investors".  As such, loan servicers typically have no "skin in the game".  As a result, those companies who service loans for private investors are the worst performers within the HAMP plan. 

There is a direct relationship between the performance and the number of loans that the servicer actually owns.  Citibank has a relatively large number of loans within their portfolio as opposed to loans owned by a private investor or mortgage backed security trust. 

Citibank, Saxon and GMAC has been the most successful modifier of loans on a percentage basis.  Each of these servicers have active modifications on at least 44% of their eligible loans, defined as those loans that are at least 60 days delinquent.  The worst performers include One West Bank (21%), Ocwen (20%), Bank of America (19%), Litton (16%), American Home Servicing (9%), HomeEq (4%) and Wells Fargo owned Wachovia (3%).

Bank of America has the largest number of loans at 203,470, yet only 9,367 are actually owned by Bank of America.  JP Morgan Chase is next with 153,967 eligible loans, of which only 21,871 are actually owned by the bank.  Wells is third with 118,708 eligible loans, of which only 5,041 are owned by the bank.  Most of the loans serviced by the big servicers tend to be owned by private investors. If the loans default, these banks don't suffer the same losses.  Compare these proportions to CitiBank.  Citibank services 112,998 loans and owns 31,648 of these loans.  Because Citibank owns a substantial number of the loans, they have tended to modify more of the loans so as to minimize their potential losses. 

Through December 2009, out of the 1,164,507 trial mods offered to date, only 6% or 66,465 homeowners received permanent loan mods under the HAMP plan.  However, the government claims that an additional 46,000 permanent offers are awaiting borrower acceptance as a result of the the Treasury departments increased pressure on servicers.

Source:  http://financialstability.gov/docs/report.pdf

Approximately 89% of eligible mortgage debt outstanding is covered by HAMP participating servicers.  During the 4th quarter of 2009, the number of servicers who have signed servicer participation agreements to modify loans under HAMP rose from 63 to 102.

WARNING:  Keep in mind that not every investor or loan pool within a servicer's portfolio necessarily signs up for the HAMP plan.  Investors can opt out on an individual basis.

National HAMP results:

Number of Trial Period Plan Offers Extended to Borrowers (Cumulative):  1,164,507
All HAMP Trials Started Since Program Inception:  902,620
All Active Modifications (Trial and Permanent):  853,696
Active Trial Modifications:  787,231
PermanentModifications:  66,465
Permanent Modifications Pending Borrower Acceptance:  46,056
Total Permanent Modifications Approved by Servicers:  112,521

California HAMP results:

Active trial mods:  158,935 [20% of national total]

Permanent loan mods:  13,353 [20% of national total]

Los Angeles-Long Beach-Santa Ana HAMP results:

Active trial mods:  45,945  [29% of state total]

Permanent loan mods:  3,469 [26% of state total]

Riverside-San Bernadino-Ontario HAMP results:

Active trial mods:  36,671  [23% of state total]

Permanent loan mods:  3,383 [25% of state total]

The article below takes a year end snapshot of the foreclosure situation.  However, the California numbers deserve a deeper look.  Typically, properties move through the minimum 111 day non-judicial foreclosure process at a steady rate.  Moratoriums, loan mod programs and lender manipulation have created a clogging of the pipeline at the tail end.  Consider this:  Since September 1, 2009, 106.616 Notices of Default have been filed on title and are still pending as of today.  Assuming the loan is not reinstated, the Notice of Default stage lasts at least 90 days before a sale can be set.   While generally referred to as "pre-foreclosure", this is not accurate.  The Notice of Default or NOD formally starts the non-judicial foreclosure process.  True "pre-foreclosure" properties consist of tens of thousands of other loans that are in default, yet the lenders have delayed filing the Notice of Default for their own reasons. 

The log jam is occurring when it comes to the auction dates. Sales can happen on only 21 day notice.  But these days, Lenders are repeatedly setting sale dates, waiting to the last minute and then postponing the sales.  For example, there currently 35,198 pending sale dates in the next month that were originally filed in the first 6 months of 2009.  Another 41,216 of the upcoming sales were initiated in third quarter 2009.  Another 39,478 of sales have been initiated since the beginning of the fourth quarter of 2009.  All told, 116,492 properties, hundreds of thousands of Californians, have a foreclosure sale scheduled on their home tonight.   Another 106.616 properties are in the NOD pipeline.  Historically, NODs outnumber sale date properties [NTS] by an eight to one margin.  Still, hundreds of thousands of additional loans are in default and will soon follow into foreclosure unless a substantive political solution is crafted. 

Imagine what this is going to do to home prices when these properties flood the market.  Prices will be pushed down further as long term interest rates increase as Fannie Mae stops buying mortgage backed securities.

Source:  Foreclosureradar.com.

RealtyTrac® (www.realtytrac.com), the leading online marketplace for foreclosure properties, today released its Year-End 2009 Foreclosure Market Report™, which shows a total of 3,957,643 foreclosure filings -- default notices, scheduled foreclosure auctions and bank repossessions -- were reported on 2,824,674 U.S. properties in 2009, a 21 percent increase in total properties from 2008 and a 120 percent increase in total properties from 2007. The report also shows that 2.21 percent of all U.S. housing units (one in 45) received at least one foreclosure filing during the year, up from 1.84 percent in 2008, 1.03 percent in 2007 and 0.58 percent in 2006.

Foreclosure filings were reported on 349,519 U.S. properties in December, a 14 percent jump from the previous month and a 15 percent increase from December 2008 -- when a similar monthly jump in foreclosure activity occurred. Despite the increase in December, foreclosure activity in the fourth quarter decreased 7 percent from the third quarter, although it was still up 18 percent from the fourth quarter of 2008.

"As bad as the 2009 numbers are, they probably would have been worse if not for legislative and industry-related delays in processing delinquent loans," said James J. Saccacio, chief executive officer of RealtyTrac. "After peaking in July with over 361,000 homes receiving a foreclosure notice, we saw four straight monthly decreases driven primarily by short-term factors: trial loan modifications, state legislation extending the foreclosure process and an overwhelming volume of inventory clogging the foreclosure pipeline.

"Despite all the delays, foreclosure activity still hit a record high for our report in 2009, capped off by a substantial increase in December," Saccacio continued. "In the long term a massive supply of delinquent loans continues to loom over the housing market, and many of those delinquencies will end up in the foreclosure process in 2010 and beyond as lenders gradually work their way through the backlog."

A total of 632,573 California properties received a foreclosure filing in 2009, the nation's largest state foreclosure activity total and an increase of nearly 21 percent from 2008. After four straight month-over-month declines, California foreclosure activity in December increased nearly 9 percent from the previous month, but the state's fourth quarter foreclosure activity was still down 17 percent from the previous quarter.

Source:  http://www.realtytrac.com/contentmanagement/pressrelease.aspx?channelid=9&accnt=0&itemid=8333

Jan. 7 (Bloomberg) -- Efforts by U.S. banks to help distressed homeowners have focused mainly on temporary fixes such as interest-rate reductions that may only put off the day of reckoning, despite policy makers wanting them to do more.

Banks may be forced to resort to a remedy they've been trying to avoid -- principal reductions -- as another wave of foreclosures looms and payments on risky loans rise, Bloomberg BusinessWeek magazine reports in the Jan. 18 issue.

While interest-rate reductions or extending loan terms reduce homeowners' monthly payments, they don't give much comfort to borrowers who owe more on their homes than their properties are worth. Borrowers who don't have equity in their homes are more likely to hand over the keys when they run into trouble. "The evidence is irrefutable," Laurie Goodman, senior managing director of Amherst Securities Group in New York, testified before the U.S. House Financial Services Committee on Dec. 8. "Negative equity is the most important predictor of default."

The 25 percent plunge in residential real estate prices from their 2006 peak has left homeowners underwater by $745 billion, according to research firm First American CoreLogic -- a number that tops the government's $700 billion bailout for banks. That's why Federal Deposit Insurance Corp. Chairman Sheila Bair is considering incentives for lenders to cut the principal on as much as $45 billion of mortgages acquired from seized banks. "We're looking now at whether we should provide some further loss-sharing for principal writedowns," says Bair. "Now you're in a situation where even the good mortgages are going bad because people are losing their jobs."

Deepening Crisis

The foreclosure crisis is likely to deepen this year in part because payments on many adjustable-rate mortgages are set to balloon. Unless there's a sharp recovery in property values or a change in lenders' willingness to cut principal, at least 7 million borrowers currently behind on their payments will lose their homes, Goodman estimates.

Some lenders may be coming around to the idea of principal reduction. "If you can right-size the mortgage and return to an equity situation, the incentive is to stay," says Micah Green, an attorney at Patton Boggs in Washington and a lobbyist for a coalition of mortgage bond investors. Banks can either forgive principal outright or defer it. In deferrals the borrower must pay back the full amount on the original mortgage when he sells the property; if the ultimate sales price doesn't cover the principal, the homeowner has to pay the difference, making it a less effective tool.

Deferring Principal

A principal deferral helped Marcus Beckett stave off foreclosure. The 42-year-old small-business owner couldn't afford his $2,413 monthly mortgage bill after his income dropped and his son, Riley, was born. In October, OneWest Bank agreed to defer $66,000 of the $423,000 debt on his two-bedroom condominium, which he'll have to pay back if he sells his Aliso Viejo, California, home. The monthly tab on the house he bought in 2006 is now $1,314. "It's like I got a second chance on life," Beckett says. "I feel, mentally, I'm able to keep making payments."

While principal reductions remain rare, banks are doing them more often. In the third quarter of 2009, some 21,000 home loans -- 3 percent of the total modified mortgages -- included a principal reduction or deferral, according to Mortgage Metrics, a government publication. That's up from 6,245 in the first quarter of 2009, the first time the U.S. reported the data.

Positive Results

Banks that negotiate principal reductions have seen positive results. Last year, Wells Fargo & Co. cut $2 billion of principal on delinquent loans. After the modifications, the six- month re-default rate on those loans was roughly 15 percent to 20 percent. That's less than half the industry average. "We are very comfortable with what we've been doing," says Franklin Codel, chief financial officer of the bank's home-lending unit. "We offer a principal reduction if that makes sense for that individual borrower's situation."

When principal reductions were granted for pay-option adjustable-rate mortgages -- loans with high default rates because they enabled borrowers to pay less than the cost of interest as the principal increased -- the re-default rate after 60 days fell to 6 percent, according to Mortgage Metrics.

"In terms of incentive, you have more skin in the game or less negative equity to deal with," said Fred Phillips-Patrick, director of credit policy for the Office of Thrift Supervision.

Demand Better Deals

Many banks don't want word to get around that they reduce principal. They fear that homeowners who can afford their payments will demand better deals. John Lashley, a 44-year-old salesman in Huntersville, North Carolina, is making his payments. But he is thinking about walking away from his four- bedroom home unless his lender, Sun Trust Mortgage, agrees to cut the principal on his $345,000 loan.

The house next door recently sold for $260,000, and Lashley doesn't see the point of pouring money into his house when he may never recoup the investment he made in 2007. "Why should I stay in my house?" he says. "It's not a moral decision. It's a financial decision."

The conflicting interests of mortgage lenders and home- equity lenders is a roadblock to doing principal reductions. Banks, credit unions and thrifts held $951.6 billion in home- equity loans as of Sept. 30, according to Federal Reserve data.

Dueling Interests

Mortgage lenders don't want to cut principal unless the home-equity lenders agree to take a hit. Typically, though, the home-equity lenders are reluctant; much of the value of their loans would be wiped out. That could drive more banks into insolvency, says Joshua Rosner, an analyst at investment research firm Graham Fisher in New York.

The threat of lawsuits is also hampering principal reductions. In December 2008 money manager Greenwich Financial Services sued lender Countrywide Financial in New York State Supreme Court. Greenwich, which owns mortgage-backed securities, demanded 100 cents on the dollar for some Countrywide investments. The securities included loans on which Countrywide had agreed to cut $8.4 billion in principal and interest to settle allegations of predatory lending.

Greenwich Financial's case is pending. Bank of America Corp., which bought Countrywide in 2008, says: "We are confident any attempt to stop this program will be legally unsupportable." Greenwich says it's willing to accept loan changes that benefit borrowers.

No Pressure

So far the feds haven't put pressure on banks to forgive debt. President Barack Obama's $75 billion program to spur banks to alter loan terms doesn't require them to do so. But the FDIC and other regulators are looking at measures to promote the writedowns. Mark Zandi, the chief economist for Moody's Economy.com, who has testified before Congress on housing issues, proposes that banks receive a federal match of $1 for every $2 in principal reductions they offer to homeowners who were victims of predatory lending practices. "You're not going to wipe out all the borrowers' negative equity," he says. "This just gives them enough hope to get them committed again."

To contact the reporters on this story: Prashant Gopal in New York at pgopal2@bloomberg.net; John Gittelsohn in New York at johngitt@bloomberg.net.