Freddie Mac 2010 Annual Report Download - page 132

Table 46 presents the number of single-family loans that completed or were in process of modification under HAMP as
of December 31, 2010 and 2009.
Table 46 — Single-Family Home Affordable Modification Program Volume
(1)
Amount
(2)
Number of Loans Amount
(2)
Number of Loans
As of
December 31, 2010
As of
December 31, 2009
(dollars in millions)
Completed HAMP modifications
(3)
................................... $23,635 107,073 $ 3,127 13,927
Loans in the HAMP trial period. . . . . . . . ............................. $ 4,905 22,352 $28,151 129,380
(1) Based on information reported by our servicers to the MHA Program administrator.
(2) For loans in the HAMP trial period, this reflects the loan balance prior to modification. For completed HAMP modifications, the amount represents the
balance of loans after modification under HAMP.
(3) Completed HAMP modifications are those where the borrower has made the last trial period payment, has provided the required documentation to the
servicer and the modification has become effective. Amounts presented represent completed HAMP modifications with effective dates since our
implementation of HAMP in 2009 through December 31, 2010 and 2009, respectively.
As of December 31, 2010, the borrower’s monthly payment was reduced on average by an estimated $566, which
amounts to an average of $6,787 per year, and a total of $727 million in annual reductions for all of our completed HAMP
modifications (these amounts are calculated by multiplying the number of completed modifications by the average reduction
in monthly payment, and have not been adjusted to reflect the actual performance of the loans following modification).
Except in limited instances, each borrower’s reduced payment will remain in effect for a minimum of five years and
borrowers whose payments were adjusted below current market levels will have their payment gradually increase after the
fifth year to a rate consistent with the market rate at the time of modification. Since we repurchase loans modified under
HAMP from our PC pools, we bear the costs of these payment reductions. Although mortgage investors under the MHA
Program are entitled to certain subsidies from Treasury for reducing the borrowers’ monthly payments from 38% to 31% of
the borrower’s income, we do not receive such subsidies on modified mortgages owned or guaranteed by us.
The number of our loans in the HAMP trial period declined to 22,352 as of December 31, 2010 from 129,380 as of
December 31, 2009. A large number of borrowers entered into trial period plans when the program was initially introduced
in 2009, and many of them either received permanent modifications or had their trial period plans cancelled in 2010.
Significantly fewer new borrowers entered into HAMP trial period plans during 2010. Consequently, we expect fewer
borrowers will complete a HAMP modification during 2011 than did in 2010, since a large number of the delinquent
borrowers that were eligible for the program already attempted or completed the trial period.
Approximately 31% of our loans in the HAMP trial period as of December 31, 2010 had been in the trial period for
more than the minimum duration of three months. Since the start of our HAMP effort, the trial period plans of more than
121,000 borrowers, or 48% of those starting the program, have been cancelled and the borrowers did not receive permanent
HAMP modifications, primarily due to the failure to continue trial period payments, the failure to provide the income or
other required documentation of the program, or the failure to meet the income requirements of the program. To address the
documentation issues, guidelines for HAMP provide that, beginning with trial periods that became effective on or after
June 1, 2010, borrowers must provide income documentation before entering into a HAMP trial period. The ultimate
completion rate for HAMP modifications, which is the percentage of borrowers that successfully exit the trial period and
receive final modifications, remains uncertain. When a borrower’s HAMP trial period is cancelled, the loan is considered for
our other workout activities. For more information on our HAMP modifications, including redefault rates on these loans, see
“Loan Workout Activities.”
In March 2010, Treasury expanded HAMP to include borrowers with FHA-insured loans, including incentives
comparable to the incentive structure of HAMP. In November 2010, we notified our seller/servicers that we will not pay any
incentive fees for mortgages modified under HAMP that are insured by FHA.
During 2010, Treasury issued guidelines for the following enhancements to HAMP. We do not currently have plans to
apply these changes to mortgages that we own or guarantee. However, it is possible that FHFA might direct us to implement
some or all of these changes.
•Unemployed Homeowners: In May 2010, Treasury announced a plan to provide temporary assistance for unemployed
borrowers while they search for employment. Under this plan, certain borrowers may receive forbearance plans for a
minimum of three months. At the end of the forbearance period or when the borrowers’ financial situation changes,
e.g., they become employed, the borrowers must then be evaluated for a HAMP modification or other loan workouts,
including HAFA.
•Principal Reduction Approach and Incentives: In June 2010, Treasury announced an initiative under which servicers
will be required to consider an alternative modification approach including a possible reduction of principal for loans
with LTV ratios over 115%. Mortgage investors will receive incentives based on the amount of reduced principal. In
October 2010, Treasury provided guidance with respect to applying this alternative for borrowers who have already
129 Freddie Mac