Calculated Risk: More on HAMP

Calculated Risk:

From Diana Olick at CNBC: Mortgage Mods Doomed by Back End Debt. On the absurdly high back end debt-to-income ratio:

"A 64.3% DTI is so far out of scope with the pre-bubble years safe and sound 36% total DTI — and even typical bubble-years full-doc DTI's of 50% — it is absolutely irresponsible," says mortgage analyst Mark Hanson. "Servicers are pushing the envelope with respect to getting people to qualify," he adds.

Olick adds:

I have to wonder if any mortgage originator today would even offer a new loan to anyone with those kinds of stats. My guess is no.

I hope not!

And from David Streitfeld at the NY Times: U.S. Mortgage Program Stalling, Data Shows

David Stevens, assistant secretary for housing at HUD ... said the program should be considered in light of the government’s extensive efforts over the last year to shore up the housing market. These efforts included keeping a lid on home mortgage rates, a tax credit and refinancing programs for those who owed more than their house was worth.

Stevens is referring to all the government programs aimed at supporting house prices (the assumed overall strategy). HAMP was very successful at delaying foreclosures and keeping the level of distressed inventory down. Other programs, such as the housing tax credit and Fed MBS purchase program, were aimed at boosting demand.

Lower supply and higher demand kept house prices from falling further. I guess if house prices don't fall too far from here, it is possible that the overall strategy could be considered a success even though some of the tactics, like HAMP and the housing tax credit, were clear failures when analyzed separately.

Posted via email from Jim Nichols