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Mortgage Mods Doomed by Back End Debt
CNBC.com | May 17, 2010 | 05:35 PM EDT

Much like America's waistlines, the Treasury Department's monthly report on the Home Affordable Modification Program continues to grow.

What started as a four-page report has now reached ten pages, with the latest addition to the "lender accountability" category: Conversion Rate and Aged Trials as Share of Active Trials.

Don't get me wrong, these provide a lot of insight into why so many borrowers are not getting permanent modifications. The top four lenders (Bank of America, JP Morgan Chase, Wells Fargo and CitiMortgage) take up the bulk of the bottom slots on the Conversion Rate chart. All four convert less than 26 percent of trial mods to permanent mods.

While most don't want to go on the record with me, lest they rile the regulators, Bank of America's Rick Simon says initially, "All the major banks, at Treasury's suggestion, went to non-verified income for verification."

That seems to be the crux of the problem.

Imagine that: Folks who didn't have to show any proof of anything to get a trial modification, weren't able to sustain that modification. The big guys have now changed that, requiring full documentation. So big surprise the report now shows a drop in the number of new modifications, because if you have to get all that documentation up front, then it's likely going to take longer.

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