Banks Helping Homeowners more than HAMP?

In a recent report, it was discovered that banks have been doing nearly twice as many modifications as Obama’s new Home Affordable Modification Program (HAMP). That being said, it is important to take a closer look at the modifications being done. It is likely that the majority of bank modifications are not as good as the HAMP modifications which can lower the monthly payments to 31% of the pre-tax income.

Although banks have been doing more loans than the President’s HAMP program, they do give credit to the program for helping to set an industry standard for the loan modifications. That being said, one huge difference is that the banks modifications can vary widely from one person to the next and there is not very much information available about their offerings.

California Foreclosure Rates Drop

According to recent data from the Mortgage Bankers Assocation, the number of borrowers who have been delinquent on their payments has been reduced. In addition, the number of seriously delinquent loans (90+ days) also dropped from 9.54% to 9.11%. This drop was the largest the MBA has ever recorded.

At the end of 2009, California forclosures made up approximately 20% of the nations delinquencies. By the second quarter that number had dropped to 14.7%.

Another positive note for the nation was the drop in borrowers “underwater”. When a borrower is underwater, they owe more than their home is worth. This is one of the main signs that a foreclosure is imminent.

Repo Tests for Withdrawal Readiness Program

In recent news, the Federal Reserve has announced that they will be conducting a reverse repurchase agreement in order to test one of the tools for a future withdrawal of the central bank’s monetary stimulus.

Currently the series of tests do not represent a change to the monetary policy but are in fact part of the Fed’s preparation to determine readiness of their program, which will include agency mortgage backed securities for the first time.

During a reverse repurchasing agreement, the Fed will lend securities for a pre-set length of time. After the funds reach maturity they will be returned to the fed.

This possible reverse repo is just one of a number of tools that the Fed is considering using in order to withdraw some of the money that was put into the financial system to combat the recession.