If you are a homeowner who is having trouble with your finances and can’t keep up with paying your mortgage, the following months until December may be your last chance to qualify for HAMP.
HAMP or the Home Affordable Modification Program, is set to expire this year, with its last application date on December 30. But while its refinance counterpart, the HARP® or Home Affordable Refinance Program® has been extended until next year, homeowners are wondering if this would be the end of the government’s mortgage modification program.
To address this issue, the Mortgage Bankers Association (MBA) set up a working group consisted of 35 representatives from 20 different companies called The Future of Loss Mitigation Task Force to evaluate whether something can be done to continue aid to struggling homeowners.
The Proposal
On Friday, September 23, the task force revealed One Mod: Principles for Post-HAMP Loan Modifications, their proposed successor to the HAMP. The presented program was designed by drawing upon diverse perspectives from the crisis and HAMP to devise principles that will be effected in an improved loss mitigation program in the future.
The focus of the new program is to create a unified framework that “offers clarity and predictability to both servicers and consumers; equitable outcomes that do not vary based on the particular government insurer or guarantor; and provides servicers with a single program to administer,” hence the name One Mod.
The program is slated to reduce at least 20 percent in mortgage payment for those who will be determined eligible. It also imposes less strict requirements for borrowers to prove hardship in their application.
The Guiding Principles
To drive successful loss mitigation programs, One Mod is developed around its four guiding themes: Accessibility, Affordability, Sustainability and Transparency. Its 10 core principles are as follows:
- Eliminate “gaps” that consumers can fall through.
- Only require the consumer submit documentation that is directly related to their eligibility for the modification.
- Produce a positive outcome for the investor.
- Result in a decrease in mortgage payments for the consumer immediately following modification.
- Distinguish between short-term hardships and longer-term hardships.
- Use waterfall of options and loss mitigation solution that are based on criteria that have a clear impact on re-default rates.
- Provide a solution that maximizes the relief that the consumer is eligible for in the first loss mitigation offer.
- Offer home retention and liquidation options at the same time.
- When a term extension is utilized, educate the consumer about how additional money applied to monthly payments can change the amortization schedule.
- Provide clear disclosure to the consumer of their loss mitigation options and the rationale for the selected loss mitigation option presented to the consumer.
A “waterfall proposal” program is developed with the goal of offering deep relief to homeowners while providing positive outcome for investors.
Recognizing the Need
The convention recognized the need for a new program to supersede HAMP’s previous function, this time, one that takes into consideration outlooks gained from a preceding system. The task force is co-chaired by Quicken Loans’ Alex McGillis and JPMorgan Chase’s Erik Schmitt.
You can download and read the 21-page, six-part full paper here.
Justin McHood is America's Mortgage Commentator and has been providing expert mortgage analysis for over 10 years.
