Mortgage servicers dramatically increased the number of trial loan modifications offered to borrowers under the Making Home Affordable program in October, but the number of permanent modifications remained small.
The Treasury Department said Tuesday that trial modifications were given to 163,913 borrowers in October, a 38% increase from September, bringing the total number of trial modifications so far to 650,994.
The agency, however, did not release the number of trial mods that were converted to permanent.
"There are far fewer borrowers who have hit the deadline for converting to permanent modifications. It's a very small percentage of the total," said Meg Reilly, a Treasury spokeswoman.
The department is verifying information it has received from servicers on the number of trial modifications that have been converted to permanent, she said, and expects to release that data in a few weeks.
Though the program has been up and running for five months and the guidelines were loosened last month to give borrowers a two-month extension to send in the necessary financial documents, servicers have lowered their expectations for success in recent months.
Of the servicers involved in the program, Morgan Stanley's Saxon Mortgage Services Inc. started the most trial modifications in proportion to its portfolio, covering 44% of its eligible delinquent loans. Citigroup Inc. ranked second with 40%, followed by GMAC Inc. with 35%.
JPMorgan Chase & Co. began trial mods for 32% of its eligible loans, Wells Fargo & Co. did so for 29% and Bank of America Corp. started trials on 14%.
Paul Koches, the general counsel for Ocwen Financial Corp. in West Palm Beach, Fla., said the industry's pull-through rate in converting borrowers from trial to permanent modifications has been abysmal, at roughly 2%.
One reason is because servicers are allowed to accept verbal verification of income and hardship from borrowers to qualify for a trial mod, but many of those borrowers ultimately fail to turn in the necessary documents.
"This all ties back to capacity issues and whether the industry is able to make a dent in the problem," Koches said.
Though the Treasury program offers incentive payments to mortgage servicers and investors, those payments are made only when a loan modification becomes permanent.