How Bad are the HAMP Delinquency Statisics?
There is definitely some controversy going on with the HAMP default numbers. From HousingWire:
“Since the Making Home Affordable report was posted on July 20th, Fannie Mae, which administers the program, has reported to Treasury an issue in its implementation of the delinquency statistic methodology used to report performance of permanent modifications. Fannie Mae is now revising the data, and Treasury has retained a third‐party consultant to provide additional review and validation. Upon completion of that independent review, a revised table will be provided.”
Jon Prior notes:
A report released in June by the Office of Thrift Supervision (OTC) and the Office of the Comptroller of the Currency (OCC) reported a different view of the HAMP redefaults.
In fact, the OTS/OCC numbers do not match what the Treasury numbers show, not only in percentages, but in the raw number 20,679 of Q4 2009 HAMP mods that they show differs from the 91,125 Q4 2009 HAMP mods from the Treasury.
I admit, I stared at the Treasury HAMP numbers for hours — trying to decipher WTF was going on. I still can’t fully understand their methodology, if there even is one to be understood. However, I did come away with one simple take on the matter. I figure there are very few loans that are 90+ days delinquent in Q1 2010, and those of which would be canceled at this point, since there hasn’t been enough time to be that late. So, if I take the total 103,071 permanent loan mods from Q3 and Q4 2009, then the total 60+ delinquent loans total 6101. I took the percentage number from the 3 month category and and the percentage from the 6 month category individually, then I will get a total of 6101. Since the Treasury excludes loan mods that are 90+ days delinquent and removes them from the delinquency statistics; I took the 8628 permanent loan mods that had been canceled, excluding those that have been paid off, and added it to the total of permanent loan mods to get 111,699. I also added that to the 6101 delinquent loans to get 14,729. What happens to the default rate now?
It becomes 13.2%, so very far from the 4.5% the Treasury is reporting. Why do I not include the more recent loan mods? Because it is impossible for them to be 90+ days late, and the most recent month’s worth can’t even be 30 days late. Furthermore, When looking at default rates, it is best to compare when it was originated, or what the vintage/year/month it is from with the rate of delinquency it is currently seeing.
But I’m not done! The Treasury neglects to include 30+ day delinquencies. The OTS figures from Q4 2009 the loans that are 30+ delinquent and three months after modification are at 16.7%, and the loans that are 60+ days are at 7.7% delinquent; then 9% must be less than 60 days delinquent. Those that understand roll rates, know that using 9% is being conservative. When I add that 9,276 to the 14,729 total it equals 24,005 that have re-defaulted. This equates to a cumulative re-default rate of 23.3% for Q3-Q4 2009.
When the Q1 2011 numbers are released, I wouldn’t be surprised to see a re-default rate of 40% for the Q3 and Q4 2009 vintages. I can’t say that I will be shocked if the rate is greater than 50%. I do think that the newer vintages will see a lower default rate, but I do believe they will exceed the more optimistic expectations. I am curious to see how they recalculate the re-default rates, and how or if they may exclude data that might be relevant. It would be nice if the Treasury would just cite their methodology, like any decent economic report not produced from NAR, but from the look of things so far — I won’t be holding my breath for more transparent data.
