• DYE CULIK PC | Consumer Protection Division

New HAMP Guidelines Issued for End Date of Loan Modification Program


HAMP

Home Affordable Modification Program (HAMP), which clarifies when the program ends. HAMP’s purpose is to stabilize the housing market and help struggling homeowners get relief and avoid foreclosure.

Under a budget appropriations act passed at the end of 2015, HAMP will end on December 31, 2016. The new guideline, HAMP Supplemental Directive 16-02, clarifies some of the deadlines associated with applying for a loan modification before it ends.

To be considered for a HAMP loan modification, a homeowner must submit an “initial package” by no later than December 31, 2016. The initial package typically consists of an application form called a Request for Mortgage Assistance, along with supporting financial documentation such as bank statements, tax returns, and pay stubs.

For any loan modification that is approved, its effective date must be no later than September 30, 2017. Under HAMP, homeowners are first given a three-month Trial Period Plan, or trial loan modification. Only if the homeowner makes all their payments on time must a permanent loan modification be provided. The payments must be made no later than the last date of the month in which the payment is due.

HAMP was started by President Obama started after the economic crisis of 2008-2009. It uses a so-called “waterfall” calculation to determine what a loan-modification payment should be. This is typically either 31% of the borrower’s gross monthly income, or the market interest rate. Although there is no requirement to forgive the arrears or principal under a HAMP loan modification, some mortgage servicers may voluntarily do so. It also uses a Net Present Value calculation to determine whether to approve a loan modification.

Supplemental Directive 16-02 also reaffirms that mortgage servicers must not foreclose on homeowners while their loan-modification applications are pending. Homeowners are given what is called protection against unnecessary foreclosure. Until recently, many banks were engaging in so-called “dual-tracking,” which is simultaneously foreclosing and reviewing the homeowner for a loan modification.

This new HAMP guideline does not apply to applications submitted related to loans owned by Fannie Mae, Freddie Mac, or the Federal Housing Administration (FHA).

Massachusetts homeowners, however, are still entitled to protections under the Massachusetts loan modification law, Chapter 244, Section 35B of the Massachusetts General Laws. This law requires that, prior to foreclosure, mortgage servicers review loans with risky features for loan modifications. Such features include a high loan-to-value ratio, adjustable interest rate, or lack of documentation.

Culik Law has handled homeowners’ mortgage cases at all levels, from a loan modification issue to complex federal litigation against trustees of mortgage-backed trusts. If you have problems with your loan modification, contact us for a no-cost case evaluation.

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