Servicers participating in the Home Affordable Modification Program (HAMP) will soon have to obtain and verify borrowers' financial documentation prior to offering a trial modification, according to new guidance from the Treasury Department and the Department of Housing and Urban Development (HUD).
The updated process requires servicers to evaluate a borrower for HAMP eligibility only after the borrower submits an ‘initial package’ tjat includes a request for modification and affidavit form, IRS Form 4506-T/4506T-EZ and evidence of income. The change is intended to improve the rate of temporary modifications converting into permanent modifications, and it becomes effective for all HAMP trial-period plans with effective dates on or after June 1, 2010. Servicers can, however, implement the changes immediately.
Also included in Supplemental Directive 10-01 is instruction about the proper procedures for converting borrowers whose trial modifications are under the temporary review period installed by the Treasury in December.
Â ‘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," says HUD's senior advisor for housing finance, William Apgar.
The new requirements are a step in the right direction, but they still lack teeth, according to Andrew Jakabovics, associate director of housing and economics at the Center for American Progress (CAP). In an opinion piece posted on the CAP Web site, Jakabovics notes that the directive's obligations for timely responses from servicers (i.e., servicers must acknowledge receipt of a modification request within 10 days and a decision on a modification within 30 days), the "lack of penalties for servicer noncompliance or a true appeals process is disappointing."
"Case in point: A borrower who sends in documentation and gets no acknowledgement within 10 days – even if they can produce a delivery confirmation – must follow up by phone with the servicer," Jakabovics writes. "It remains to be seen what the servicer will tell the borrower other than they don't know where it is and could the borrower please resend the package. While requiring acknowledgement is good in theory, the new guidance offers borrowers no real recourse in cases of servicer noncompliance."