A new report issued by Fitch Ratings today shows that the end of the U.S. Treasury’s Home Affordable Modification Program (HAMP), scheduled for Dec. 31, 2016, may hurt U.S. homeowners with fewer loan modifications. A further HAMP extension is said to be unlikely.
The U.S. government’s mortgage assistance initiative is known as the “Home Affordable Modification Program,” and is more commonly referred to as HAMP was started in 2009. A HAMP loan modification is when your current mortgage that is held by Fannie Mae, Freddie Mac, FHA and or VA loan is modified by changing the terms to a more affordable monthly payment.
This is normally done by lowering your interest rate, adding past due payments onto the mortgage balance and or extending the term length of your mortgage from say 30 years to 40 years.
The HAMP program provided uniform loss mitigation policies across the mortgage servicing industry. Servicers are required to conduct full reviews of applications for acceptability to HAMP guidelines; ineligible candidates are usually subsequently screened for acceptability under proprietary modification programs.
The end of HAMP removes this initial step and servicers will likely be able to make faster modification decisions. This may contribute to shorter liquidation timelines for the portion of loans that do not qualify for proprietary modifications.
Fitch said that to date, HAMP loan modifications have accounted for approximately 50% of all loan modifications completed this year. HAMP monthly applications have dropped steadily and are now approximately 70% below the monthly average at the start of the program.
Fitch believes there are several implications to the end of HAMP:
–As the total number of loan modifications declines, non-HAMP ‘proprietary’ modifications will be used more frequently;
–More proprietary modifications will lead to less consistency of servicer modification approaches across the industry;
–Modification decision timelines will shorten, which may lead to a modest reduction in liquidation timelines.
Fitch said that borrowers applying for loan modifications in 2017 may find it easier in the documentation gathering process and faster approval/decline decisions.
The end of HAMP does mean that homeowners will not be able to get mortgage help. Mortgage servicers will have existing programs and in house loan modifications available for those who qualify.