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Overview
On January 28, 2010, the U.S. Department of the Treasury and the Department of Housing and Urban Development (HUD) released updated guidance for servicers participating in the Home Affordable Mortgage Program (HAMP).
This guidance, given in Supplemental Directive 10-01, refines the documentation requirements in order to expedite conversions of current trial modifications to permanent ones.
On December 23, 2009, the Obama Administration required most trial modifications to be placed in a temporary review period to ensure that all borrowers are being fairly evaluated for the program. During this temporary review period, servicers were not permitted to cancel an active HAMP trial modification for any reason other than failure to meet the HAMP property eligibility requirements. This allowed servicers to convert a significant number of trial modifications to permanent ones.
According to HUD, the total number of conversions more than doubled in December. The subject guidance is meant to help improve this conversion process for the future.
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Highlights
Guidance in Two Major Issues
1. New Requirements that Documentation be Provided Before Trial Modification Begins
The guidance refines the documentation process and makes it easier for eligible borrowers in trial modifications to get permanent modifications quickly.
Under this guidance:
- A simple, standard package of documents will be required prior to the servicer's evaluation of the borrower for a trial modification. This process will be required for all new HAMP modifications that become effective on or after June 1, 2010, although mortgage servicers may implement it sooner.
2. Converting Borrowers in the Temporary Review Period to Permanent Modifications
In December, Treasury implemented a review period through January 31, 2010 to provide servicers additional time to collect and submit missing documentation for borrowers in trial modifications, to require that borrowers be notified of any missing documents, and to give borrowers an opportunity to dispute and correct any erroneous information in their applications.
- The guidance clarifies for servicers the proper procedures for conversion of those borrowers who are current on their monthly payments to permanent modifications
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Visit our Library for Issuance 
Home Affordable Modification Program - Program Update and Resolution of Active Trial Modifications, Supplemental Directive 10-01, 1/28/10
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Lenders Compliance Group is a full-service, mortgage risk management firm, providing professional guidance to financial institutions in all areas of mortgage compliance.
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