The expansion of the Home Affordable Modification Program’s guidelines to include a wider array of borrowers could cause modification rates to pick up by as much as 36%, according to researchers at Bank of America Merrill Lynch. The U.S. Department of Housing and Urban Development and the Treasury announced the new guidelines, which aim to help more underwater homeowners modify their mortgage rates.
The revised guidelines no longer require eligible homeowners to have no more than a 31% first lien debt-to-income ratio, according to analysts Chris Flanagan and Tim Isgro. Investor homes—or homes not occupied by the owner—are also now eligible for the program, they said. Those changes expand eligibility to an estimated 1.3 million additional homeowners.
Since 2009, when HAMP was launched, 909,953 borrowers have received permanent modifications of their mortgages under the program, according to Flanagan and Isgro. Under the expanded eligibility guidelines, “Assuming 59% of [newly eligible borrowers] qualify for HAMP and pass trials over the course of 24 months, that would result in 27,000 additional permanent HAMP mods per month,” they said. The mod rate now stands at about 25,000....