The Mortgage Bankers Association (MBA) has introduced its proposed successor program to the Home Affordable Modification Program (HAMP), which is scheduled to sunset on Dec. 31.
The new proposed program, “One Mod: Principles For Post-HAMP Loan Modifications,” was developed by The Future of Loss Mitigation Task Force, a diverse MBA working group consisting of representatives from 20 member companies. It draws upon the experiences of lenders familiar with HAMP to formulate universal principles that should be applied to a future program, the MBA says in a release.
The program offers at least a 20% payment reduction for eligible borrowers while minimizing the excessive documentation requirements that have caused hardship for HAMP applicants.
It is based on the following 10 guiding principles developed by the task force:
1. Eliminate “gaps” that consumers can fall through;
2. Only require the consumer to submit documentation that is directly related to his or her eligibility for the modification;
3. Produce a positive outcome for the investor;
4. Result in a decrease in mortgage payments for the consumer immediately following modification;
5. Distinguish between short-term hardships and longer-term hardships;
6. Use waterfall of options and loss mitigation solutions that are based on criteria that have a clear impact on redefault rates;
7. Provide a solution that maximizes the relief that the consumer is eligible for in the first loss mitigation offer;
8. Offer home retention and liquidation options at the same time;
9. When a term extension is utilized, educate the consumer about how additional money applied to monthly payments can change the amortization schedule; and
10. Provide clear disclosure to the consumer of his or her loss mitigation options and the rationale for the selected loss mitigation option presented to the consumer.
The task force is co-chaired by Alex McGillis of Quicken Loans and Erik Schmitt of JP Morgan Chase.
“MBA’s task force recognizes that the industry, borrowers and investors need a successor to HAMP that is consistent and can be widely scaled,” said Pete Mills, senior vice president of residential policy and member services at the MBA, in a release. “Application of the task force’s principles and the ‘One Modification,’ or ‘One Mod,’ will go a long way towards offering deep payment relief for struggling homeowners and a positive economic outcome for investors. We look forward to continued discussions with government agencies, the [government-sponsored enterprises] and other stakeholders about these principles and the proposal.”
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