(LoanSafe.org) – 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 eligible borrowers with sustainable monthly housing payments. This Supplemental Directive provides servicers flexibility to provide assistance to borrowers whose hardship is related to unemployment. When a borrower is unemployed, a HAMP trial period plan or permanent HAMP modification may not be appropriate, and in some cases, the borrower may not have the ability to make the required payments.
This Supplemental Directive requires servicers to consider eligible borrowers for the Home Affordable Unemployment Program (UP), which grants borrowers a forbearance plan during which regular monthly mortgage payments are reduced or suspended. Borrowers will be evaluated for HAMP at the earlier of re-employment or 30 days prior to the expiration of the UP forbearance plan.
This Supplemental Directive provides guidance to servicers of first lien mortgage loans that are not owned or guaranteed by Fannie Mae or Freddie Mac (Non-GSE Mortgages) or insured or guaranteed by a federal agency, such as the Federal Housing Administration (FHA), and is effective for all participating servicers on July 1, 2010. However, servicers may begin to offer UP earlier so long as all unemployed borrowers that are potentially eligible are considered for UP as of the date the servicer begins offering UP. Servicers that have executed a servicer participation agreement and related documents (SPA) must follow the guidance set forth in this Supplemental Directive. Servicers of first lien mortgage loans that are owned or guaranteed by Fannie Mae or Freddie Mac should refer to relevant guidance issued by the applicable GSE.
Help for Unemployed Borrowers
This guidance replaces the language under the heading “Unemployment Benefits” in the “Borrower Income/Asset Documentation and Verification of Eligibility” section of Supplemental Directive 10-01. A borrower who is unemployed and requests assistance under HAMP must be evaluated for and, if qualified, receive an UP forbearance plan before the borrower may be considered for HAMP. For borrowers being considered for trial period plans with effective dates on or after July 1, 2010, servicers may no longer consider unemployment insurance benefits as a source of income when evaluating borrowers for HAMP. For purposes of this Supplemental Directive, the term “borrower” includes any co-borrower.
UP Forbearance Plan Eligibility
-Servicers are required to offer an UP forbearance plan to a borrower who meets the following HAMP minimum eligibility criteria:
-The mortgage loan is secured by a one- to four-unit property, one unit of which is the borrower’s principal residence.
-The mortgage loan is a first lien mortgage loan originated on or before January 1, 2009.
-The current unpaid principal balance of the mortgage loan is equal to or less than $729,750.1
-The mortgage loan is delinquent or default is reasonably foreseeable.
-The mortgage loan has not been previously modified under HAMP and the borrower has not previously received an UP forbearance period.
Additional UP forbearance plan eligibility requirements include that the borrower:
-Makes a request before the first mortgage lien is seriously delinquent (before three monthly payments are due and unpaid). A request for UP may be made by phone, mail or email. Servicers must document the date of the UP request in the servicing file and, within 10 business days, confirm the receipt of the request with the borrower via mail or return email.
-Is unemployed at the date of the request for UP and is able to document that he or she will receive unemployment benefits in the month of the Forbearance Period Effective Date (defined below) even if his or her unemployment benefit eligibility is scheduled to expire before the end of the UP forbearance period.
The servicer may, pursuant to investor or regulator guidelines, require a borrower to have received unemployment benefits for up to three months before the forbearance period will begin. A borrower who has received unemployment benefits for less than the minimum time period required by the servicer may request consideration for an UP forbearance plan; however, the forbearance period will not begin until after the borrower has received unemployment benefits as required by the servicer. Servicers must have written procedures for determining when a borrower must be in receipt of up to three months of unemployment benefits and must consistently apply those procedures.
To be eligible for HAMP, a borrower’s total monthly mortgage payment (principal, interest, taxes, insurance and association fees, if any) prior to the modification must exceed 31 percent of the borrower’s gross income. To streamline the delivery of unemployment assistance, a servicer may waive this criterion for UP forbearance plan eligibility. However, servicers are not required to offer an UP forbearance plan to borrowers whose total monthly mortgage payment is less than or equal to 31 percent of the borrower’s monthly gross income, including unemployment benefits. Servicers are not required to offer an UP forbearance plan if a household member that is not a borrower becomes unemployed, even if that income contributed to the mortgage payment.
Unemployed borrowers who do not meet the eligibility criteria for an UP forbearance plan should be evaluated for other proprietary forbearance programs. Borrowers that are not offered any type of forbearance plan must be evaluated for HAMP, excluding from monthly gross income unemployment benefits and any other temporary sources of income related to unemployment, such as severance payments. If the borrower is not eligible for HAMP, the servicer must send the borrower a Non-Approval Notice in accordance with Supplemental Directive 09-08 and describe other foreclosure alternatives for which the borrower may be eligible, including but not limited to the Home Affordable Foreclosure Alternatives Program (HAFA) or other short sale or deed-in-lieu programs.
A borrower in a permanent HAMP modification that becomes unemployed is not eligible for an UP forbearance plan. A borrower who was previously determined to be ineligible for a HAMP modification may request consideration for an UP forbearance plan if the borrower meets all of the eligibility requirements.
For more on the guidelines to this program please visit hmpadmin.com