Treasury to Announce Mortgage Modification Plan Changes
Changes Come as Lawmakers Craft Tougher Regulations for Banks
March 25, 2010
The Treasury Department today will announce changes to the Obama administration's embattled $75 billion Home Affordable Modification Program (HAMP) to help owners facing foreclosures.
The key changes, detailed below, ban lenders from starting foreclosures unlesshomeowners have first been deemed ineligible for the program.At a hearing Thursday morning before the House Oversight Committee, the Treasury's TARP chief Herb Allison will announce new protections for homeowners in the modification process who also face a pending foreclosure. The protections are designed to eliminate much of the confusion and anxiety that many homeowners deal with in these situations.
Treasury has been considering these changes since last month. On February 25, ABC News reported on an internal agency document outlining some of the possible measures.
The measure comes as lawmakers on Capitol Hill are calling for tougher financial regulations for banks that run out of capital.
Congress will impose "the toughest new forms of financial regulations since the New Deal," Rep. Barney Frank, D-Mass., said on "Good Morning America" today.
That means no more federal funding for banks that are going under water. At a hearing this week, Frank said that Congress will impose "death panels," but "they're death panels for large financial institutions that can't make it."
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"You can't continue to indebt yourself without capital," said Frank, who chairs the House Financial Services Committee. "If an institution becomes so indebted... unlike AIG, which was kept alive in 2008... that will go out of business. ... You're not going to have any institution kept alive with federal funding."
According to the new Treasury guidance on the program obtained by ABC News, at Thursday's hearing Allison will announce:
Early Intervention
Servicers must pre-screen every borrower that has missed two or more payments to determine if they are potentially eligible for HAMP and, if so, must proactively solicit those borrowers for the program. This change encourages servicers to reach out to a borrower as early as 31 days of delinquency when there is the best chance to retain homeownership.
Foreclosure Referral Prohibition
Servicers may not refer any borrower who is potentially eligible for HAMP to foreclosure until the borrower has been evaluated and determined to be ineligible, or the borrower did not respond to the servicer's solicitation efforts. By defining "reasonable solicitation efforts" the guidance allows servicers to proceed with normal debt collection actions when borrowers are unresponsive.
HAMP Evaluation Timeframes
The guidance holds all parties accountable for timely performance by clearly defining how a borrower requests HAMP consideration and establishing specific timeframes for both borrower and servicer document delivery and evaluation. Borrowers can expect a modification decision within 30 days. In most cases, if a borrower is not eligible for HAMP, they will benefit from a 30-day response period before a foreclosure sale may be held.
"The president and his economic team are committed to addressing the challenges in the housing market and have undertaken a thorough review of our program to help keep responsible homeowners in their homes," a White House spokesperson told ABC News. "Recently, the president announced the development of a pilot initiative for the hardest-hit states. Going forward, we will continue to use the administration's housing programs to increase both modification and refinancing opportunities to promote stability for the housing market and for homeowners."
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