Tuesday, February 23, 2010

You will be made aware of HAMP but it still sucks

Original posted on FT Alphaville by Tracy Alloway:

Barry Ritholtz has got his hands on something interesting – what looks to be the equivalent of Hamp on steroids.

Readers of FT Alphaville may remember that the US Treasury’s Home Affordable Modification Program, which aims to keep borrowers in their houses by reducing interest payments, has not really lived up to the government’s expectations. The Treasury is now looking for ways to modify the modification programme, such as by introducing principal forgiveness instead of just forbearance.

According to this draft presentation, which seems to have been obtained by Ritholtz as well as some news outlets like the Wall Street Journal, it looks like the Treasury is — so far — focused on simply fine-tuning its existing programme.

Some of the bullet points from the document:

Supplemental Directive 10-02 — Foreclosure & Bankruptcy Changes

  • Prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed
  • Requires servicers to stop all foreclosure action once borrower is in a trial period plan
  • Requires written certification that a borrower is not HAMP eligible before an attorney or trustee can conduct a foreclosure sale
  • Requires servicers to consider borrowers in bankruptcy for HAMP and removes other bankruptcy barriers
  • Clarifies investor solicitation/identification requirements.

In addition to tweaking some of the paperwork requirements, it looks like the Treasury wants to change Hamp’s solicitation policy — that is, the process by which delinquent US borrowers are offered trial Hamp mortgage modifications.

Under the current policy it’s merely implied that Hamp-eligible borrowers should be offered trial mods. Under the proposed policy, eligible borrowers must be offered the Hamp option. Furthermore, “reasonable solicitation” is defined as at least four telephone calls over at least a 30-day timeframe, and two written notices including one sent by “certified mail return receipt”.

The message from the US Treasury: You will be made aware of Hamp.

Whether you want it or not.

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