The mortgage giants Fannie Mae and Freddie Mac released new guidelines for their servicers modifying mortgages under the Home Affordable Modification Program (HAMP).
Under HAMP, the US Treasury Department allocates capped incentives to participating servicers for the modification of loans on the verge of foreclosure. According to the latest reports, 88 servicers have offered 1m trials and converted 30,000 of them into permanent modifications.
Through November, servicers for the government-sponsored enterprises (GSEs) have offered 33,021 trials for the 262,842 eligible loans in their portfolio, and 6,291 of those have been converted into permanent modifications, according to the latest Treasury report.
Effective Jan. 1, 2010, servicers for Fannie Mae can only evaluate a mortgage for HAMP after certain events occur, according to the new guidelines. The borrower must submit a written request for consideration that includes current borrower income and a reason for default or explanation of hardship, at a minimum. A borrower can also verbally provide sufficient financial information to the servicer to complete a net present value analysis.
Servicers must send a written notice to every borrower evaluated for HAMP without a trial period plan, permanent modification or at the risk of losing HAMP eligibility because of missing documentation. At a recent committee hearing, Congress heard testimony on why so few trial modifications have been converted into permanent status. The answer was often a lack of documentation, as servicers place borrowers in a trial plan and collect the information over the course of that trial.
According to Fannie Mae guidelines, its servicers must include a list of all financial documents needed to complete the HAMP evaluation and a deadline in its “Notice of Incomplete Information.” The notice must be sent no earlier than 30 days after the date of the borrower’s first written request. All other notices must be sent no later than 10 days after the servicer determines the borrower is ineligible for HAMP.
Effective immediately, a borrower facing imminent default is allowed to provide signed federal income tax returns to the servicer, but there remains no requirement.
Freddie Mac’s new guidelines revise some HAMP documentation, sets Jan. 1, 2010 as the deadline for servicers to begin sending timely notifications to borrowers who are not eligible for HAMP, and provides servicers more options for obtaining a net-present value for borrowers from the Treasury.
In addition, the guidelines increase the capitalization threshold from $20,000 to $50,000 when determining whether title insurance is required. The change applies to all modifications including HAMP.