{"id":804,"date":"2010-07-22T13:44:05","date_gmt":"2010-07-22T13:44:05","guid":{"rendered":"http:\/\/www.nyonlinerealty.com\/blog\/?p=804"},"modified":"2010-07-27T15:21:29","modified_gmt":"2010-07-27T15:21:29","slug":"barclays-argues-treasury-report-on-hamp-redefaults-is-misleading","status":"publish","type":"post","link":"https:\/\/blog.nyonlinerealty.com\/?p=804","title":{"rendered":"Barclays Argues Treasury Report on HAMP Redefaults is Misleading"},"content":{"rendered":"
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By: Carrie Bay<\/p>\n

Earlier this week, the Treasury Department released its monthly progress report on the government\u2019s Home Affordable Modification Program (HAMP). Included in the Treasury\u2019s latest installment is a new section detailing the performance of loans permanently modified through the HAMP initiative.<\/p>\n

In commentary published Wednesday, analysts at the research firm Barclays Capital<\/a> took issue with the Treasury\u2019s calculations of redefault rates, primarily because the numbers appear to be cooked to imply greater success since cancelled modifications \u2013 both trial and permanent \u2013 are not factored into the equation. This same point was brought up by a number of DSNews.com readers who also perused the data with a discerning eye.<\/p>\n

\u201cWe find that the data as reported in this table are misleading and fail to capture the full magnitude of redefaults from these modifications,\u201d Barclays said.<\/p>\n

According to Treasury\u2019s assessments<\/a>, the redefault rate (90 or more days past due) for homeowners in permanent modifications for at least six months is 1.7 percent. The report states that fewer than 6 percent of the permanently modified loans at the six-month mark are 60 days past due.<\/p>\n

Treasury\u2019s table outlining the performance status of modified loans, on page 3 of the HAMP progress report<\/a>, shows loans that are 60-plus and 90-plus days delinquent at the end of 3,6, and 9 months by quarter of modification. The report also states that 8,628 loans have been cancelled from the permanent HAMP modification stage due to the borrower\u2019s failure to fulfil payment obligations. Digging farther into the delinquency buckets, Barclays estimates that 8,205 permanently modified loans have fallen behind on the payments by at least 60 days.<\/p>\n<\/div>\n

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\u201cWe believe that the total number of loans that have gone bad after the permanent mod stage is probably closer to the 60-plus loans estimated above, plus the cancelled permanent modifications, which more than doubles the absolute number from 8,205 to 16,833 bad loans,\u201d Barclays\u2019 analysts wrote. \u201cThe report does not contain enough information to allow us to calculate true redefault rates by quarter of modification, but we would expect them to exceed the level reported\u201d by the Treasury, Barclays said.<\/p>\n

The research firm also says it can be argued that to measure redefault rates more accurately and make them comparable with pre-HAMP redefault rates, the Treasury should include trial cancellations related to non-payments.<\/p>\n

According to Barclays, adding back in trial failures and redefaults on other alternative mods offered to HAMP applicants could increase the redefault rates by 25-30 percentage points.<\/p>\n

Barclays says the reporting of mod performance in the HAMP scorecard takes the tradeoff of mod rates vs. redefault rates to an extreme. Removing 90-plus permanent mods from the delinquency calculation and basing the calculation only on successful modifications makes the redefault rates look too low, the research firm explained.<\/p>\n

The analysts at Barclays say their opinion is that the data presented by Treasury continue down the same path by taking deeply delinquent borrowers out of the performance calculation and showing lower delinquency rates as a result.<\/p>\n

\u201cGiven the nature of reporting available for most HAMP mods in loan performance, where only permanent mods are reported, we find that a more consistent approach is to use mod rates based on permanent mods and redefaults from permanent mods,\u201d Barclays wrote.<\/p>\n

\u201cOn that definition, we believe that our base case expectation of about 60 percent lifetime redefaults on HAMP are still adequate,\u201d the analysts wrote, although they noted that overall redefaults from HAMP \u201cwill be better than from prior mods.\u201d<\/p>\n

A recent study by Fitch Ratings<\/a> makes projections along those same lines. The agency is expecting HAMP-modified loans to redefault at a rate of 55 to 75 percent.<\/p>\n

http:\/\/www.dsnews.com\/articles\/barclays-argues-treasury-report-on-hamp-redefaults-is-misleading-2010-07-21<\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

By: Carrie Bay Earlier this week, the Treasury Department released its monthly progress report on the government\u2019s Home Affordable Modification Program (HAMP). Included in the Treasury\u2019s latest installment is a new section detailing the performance of loans permanently modified through the HAMP initiative. In commentary published Wednesday, analysts at the research firm Barclays Capital took […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[79],"tags":[228,138],"class_list":["post-804","post","type-post","status-publish","format-standard","hentry","category-articles","tag-barclays","tag-hamp"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/blog.nyonlinerealty.com\/index.php?rest_route=\/wp\/v2\/posts\/804"}],"collection":[{"href":"https:\/\/blog.nyonlinerealty.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.nyonlinerealty.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.nyonlinerealty.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.nyonlinerealty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=804"}],"version-history":[{"count":7,"href":"https:\/\/blog.nyonlinerealty.com\/index.php?rest_route=\/wp\/v2\/posts\/804\/revisions"}],"predecessor-version":[{"id":807,"href":"https:\/\/blog.nyonlinerealty.com\/index.php?rest_route=\/wp\/v2\/posts\/804\/revisions\/807"}],"wp:attachment":[{"href":"https:\/\/blog.nyonlinerealty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=804"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.nyonlinerealty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=804"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.nyonlinerealty.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=804"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}