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Home Affordable Modification Program – Program Update and Resolution of Active Trial Modifications

Home Affordable Modification Program – Program Update and Resolution of Active Trial Modifications

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Published by Foreclosure Fraud
January 28, 2010
TG-516

Administration Updates Documentation Collection Process and
Releases Guidance to Expedite Permanent Modifications

WASHINGTON – As part of the Administration's ongoing housing market stabilization plan, the U.S. Department of the Treasury and the Department of Housing and Urban Development (HUD) today released updated guidance for servicers participating in the Administration's mortgage modification program. This guidance refines the documentation requirements in order to expedite conversions of current trial modifications to permanent ones.

"With more than 850,000 homeowners in trial and permanent modifications, we are providing immediate relief to struggling homeowners," said Phyllis Caldwell, Chief of Treasury's Homeownership Preservation Office. "Today's guidance represents our commitment to more efficiently move qualified homeowners into permanent modifications."

"Increasing the number of borrowers receiving permanent modifications under HAMP is critical to our efforts to preserve affordable and sustainable homeownership," said HUD Senior Advisor for Housing Finance William Apgar. "While we continue to meet our goals to provide immediate assistance, the updates announced today should enable servicers to transition borrowers more quickly and easily from trial to permanent modification."

On December 23, 2009, the 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. In fact, the total number of conversions more than doubled in December. Guidance released today will help improve this conversion process for the future.

The updated process requires that key documents, including proof of income, be obtained from the borrower before a borrower evaluation can begin. This more robust requirement of upfront documentation will make it easier and quicker to convert trial modifications to permanent modifications and enable servicers to use their resources more effectively.

Guidance Details

Supplemental Directive 10-01 provides guidance on two major issues:

1) New Requirements that Documentation be Provided Before Trial Modification Begins

Today's 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 became effective after June 1, 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 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. Today's guidance clarifies for servicers the proper procedures for conversion of those borrowers who are current on their monthly payments to permanent modifications.

Background

The Home Affordable Modification Program aims to help responsible American homeowners maintain a sustainable monthly mortgage payment through a pay-for-success framework that aligns incentives of borrowers, lenders and servicers. Over 900,000 Americans have begun trial modifications since the program's inception and over 110,000 have been approved for permanent modifications as of Decem
January 28, 2010
TG-516

Administration Updates Documentation Collection Process and
Releases Guidance to Expedite Permanent Modifications

WASHINGTON – As part of the Administration's ongoing housing market stabilization plan, the U.S. Department of the Treasury and the Department of Housing and Urban Development (HUD) today released updated guidance for servicers participating in the Administration's mortgage modification program. This guidance refines the documentation requirements in order to expedite conversions of current trial modifications to permanent ones.

"With more than 850,000 homeowners in trial and permanent modifications, we are providing immediate relief to struggling homeowners," said Phyllis Caldwell, Chief of Treasury's Homeownership Preservation Office. "Today's guidance represents our commitment to more efficiently move qualified homeowners into permanent modifications."

"Increasing the number of borrowers receiving permanent modifications under HAMP is critical to our efforts to preserve affordable and sustainable homeownership," said HUD Senior Advisor for Housing Finance William Apgar. "While we continue to meet our goals to provide immediate assistance, the updates announced today should enable servicers to transition borrowers more quickly and easily from trial to permanent modification."

On December 23, 2009, the 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. In fact, the total number of conversions more than doubled in December. Guidance released today will help improve this conversion process for the future.

The updated process requires that key documents, including proof of income, be obtained from the borrower before a borrower evaluation can begin. This more robust requirement of upfront documentation will make it easier and quicker to convert trial modifications to permanent modifications and enable servicers to use their resources more effectively.

Guidance Details

Supplemental Directive 10-01 provides guidance on two major issues:

1) New Requirements that Documentation be Provided Before Trial Modification Begins

Today's 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 became effective after June 1, 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 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. Today's guidance clarifies for servicers the proper procedures for conversion of those borrowers who are current on their monthly payments to permanent modifications.

Background

The Home Affordable Modification Program aims to help responsible American homeowners maintain a sustainable monthly mortgage payment through a pay-for-success framework that aligns incentives of borrowers, lenders and servicers. Over 900,000 Americans have begun trial modifications since the program's inception and over 110,000 have been approved for permanent modifications as of Decem

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Published by: Foreclosure Fraud on Jan 28, 2010
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Supplemental Directive 10-01 January 28, 2010
 
 Home Affordable Modification Program – Program Update and  Resolution of Active Trial Modifications
 
Background
In Supplemental Directive 09-01, the Treasury Department (Treasury) announced the eligibility,underwriting and servicing requirements for the Home Affordable Modification Program(HAMP). Under HAMP, servicers apply a uniform loan modification process to provide eligibleborrowers with sustainable monthly payments for their first lien mortgage loans. ThisSupplemental Directive amends key features of the program. A significant program change is arequirement for full verification of borrower eligibility prior to offering a trial period plan.Effective for all HAMP trial period plans with effective dates on or after June 1, 2010, a servicermay only offer a borrower a trial period plan based on verified income documentation inaccordance with this Supplemental Directive.This Supplemental Directive also provides guidance to assist servicers in making HAMPeligibility determinations for borrowers currently in active trial period plans, including thoseborrowers subject to the temporary review period required by Supplemental Directive 09-10.This Supplemental Directive provides guidance to servicers of first mortgage loans that are notowned or guaranteed by Fannie Mae or Freddie Mac (Non-GSE Mortgages). Servicers of firstmortgage loans that are owned or guaranteed by Fannie Mae or Freddie Mac should refer to therelated HAMP guidelines issued by the applicable GSE.
Requesting Consideration for Modification
Supplemental Directive 09-01 gave servicers the option of placing a borrower into a trial periodplan based on verbal financial information obtained from the borrower, subject to laterverification during the trial period. Effective for all trial period plans with effective dates on orafter June 1, 2010, a servicer may evaluate a borrower for HAMP only after the servicer receivesthe following documents, subsequently referred to as the “Initial Package”. The Initial Packageincludes:
 
Request for Modification and Affidavit (RMA) Form,
 
IRS Form 4506-T or 4506T-EZ, and
 
Evidence of Income
Request for Modification and Affidavit (RMA) Form
The RMA Form provides the servicer with borrower and co-borrower financial informationincluding the cause of the borrower’s hardship. The financial information and hardship sections
 
 
Supplemental Directive 10-01 Page 2
 of the RMA must be completed and executed by the borrower and, if applicable, the co-borrower. The RMA also solicits data related to the race, ethnicity and gender of the borrowerand co-borrower, referred to as Government Monitoring Data (GMD). The borrower and co-borrower are not required to provide GMD. Servicers may not refuse to accept an RMA becausethe borrower or co-borrower did not complete this section. The RMA is available to servicers onwww.HMPadmin.com.Servicers may require use of the RMA by all borrowers requesting consideration for HAMP ormay continue to use other proprietary financial information forms that are substantially similar incontent to the RMA. When provided by or on behalf of the borrower, the RMA form must beaccepted by servicers in lieu of any servicer specific form(s). When the RMA is not used,servicers must obtain an executed MHA Hardship Affidavit, a standalone version of which isavailable onwww.HMPadmin.com. Servicers may also incorporate all of the information on thisstandalone affidavit into their own form. Throughout this Supplemental Directive, the termRMA is used to indicate both the HAMP RMA form and servicer proprietary forms substitutedfor the RMA.
IRS Form 4506-T/4506T-EZ
All borrowers must provide a signed and completed IRS 4506-T/4506T-EZ (Request forTranscript of Tax Return).
1
While either form is acceptable, use of Form 4506T-EZ isencouraged because of its relative simplicity. Both forms are available onwww.HMPadmin.com. Borrowers may access Form 4506T-EZ in either English or Spanish onwww.MakingHomeAffordable.gov. After completion, the borrower must print, sign and sendthe form to his or her servicer.
Evidence of Income
The Initial Package must also include the borrower’s income verification documentationdescribed in the “Borrower Income/Asset Documentation and Verification of Eligibility” sectionof this Supplemental Directive. The income evidence and financial information provided by theborrower may not be more than 90 days old as of the date the Initial Package is received by theservicer.
Acknowledgment and Review of Initial Package
Within 10 business days following receipt of an Initial Package, the servicer must acknowledgein writing the borrower’s request for HAMP participation by sending the borrower confirmationthat the Initial Package was received, and a description of the servicer’s evaluation process andtimeline. If the Initial Package is received from the borrower via e-mail, the servicer may e-mailthe acknowledgment. Servicers must maintain evidence of the date of receipt of the borrower’sInitial Package in its records.
1
IRS Form 4506T-EZ may not be applicable to borrowers that do not file federal income tax returns on a calendaryear basis, borrowers that do not file federal income tax returns using Form 1040 and borrowers that have not filed afederal income tax return. Servicers should obtain a signed and completed IRS Form 4506-T from these borrowers.
 
 
Supplemental Directive 10-01 Page 3
 Within 30 calendar days from the date an Initial Package is received, the servicer must reviewthe documentation provided by the borrower for completeness. If the documentation isincomplete, the servicer must send the borrower an Incomplete Information Notice in accordancewith the guidance set forth in the “Incomplete Information Notice” section below. If theborrower’s documentation is complete, the servicer must either:
 
Send the borrower a Trial Period Plan Notice; or
 
Make a determination that the borrower is not eligible for HAMP and communicate thisdetermination to the borrower in accordance with the Borrower Notice guidance providedin Supplemental Directive 09-08.A single written communication sent within 10 days of receipt of a borrower’s request forHAMP participation may also include, at the servicer’s discretion, the results of its review of theInitial Package. Servicers are reminded that Supplemental Directive 09-01 generally prohibitsservicers from proceeding with a foreclosure sale for any potentially eligible mortgage loan untilthe borrower has been evaluated for eligibility under HAMP and has been determined to beineligible or has declined a trial period plan offer.
Incomplete Information Notice
If the servicer receives an incomplete Initial Package or needs additional documentation to verifythe borrower’s eligibility and income, the servicer must send the borrower an IncompleteInformation Notice that lists the additional required verification documentation. The IncompleteInformation Notice must include a specific date by which the documentation must be received,which must be no less than 30 calendar days from the date of the notice. If the documents arenot received by the date specified in the notice, the servicer must make one additional attempt tocontact the borrower in writing regarding the incomplete documents. This additional notice mustinclude the specific date by which the documentation must be received, which must be no lessthan 15 calendar days from the date of the second notice. If a borrower is unresponsive to theserequests for documentation the servicer may discontinue document collection efforts anddetermine the borrower to be ineligible for HAMP. If the borrower is determined to be ineligiblefor HAMP, the servicer must communicate this determination to the borrower in accordance withthe Borrower Notice guidance provided in Supplemental Directive 09-08.
Trial Period Plan Approval
 Within 30 calendar days following receipt of an Initial Package or complete verificationdocuments, the servicer must complete its verification and evaluate the borrower’s eligibility forHAMP and, if the borrower is qualified, send the borrower a Trial Period Plan Notice. If theborrower is determined to be ineligible for HAMP, the servicer must communicate thisdetermination to the borrower in accordance with the Borrower Notice guidance provided inSupplemental Directive 09-08. Servicers are reminded that Supplemental Directive 09-01prohibits servicers from initiating a new foreclosure action while a borrower is in a trial periodplan.
 

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