As part of the Administration’s new plans last week, they clarified what you can expect to happen if you can’t make your Home Affordable Modification Program (HAMP) trial plan payments and want to try a short sale.
The Home Affordable Foreclosure Alternative (HAFA) program, which includes short sales and deed-in-lieu of foreclosure, is available if you are generally eligible for HAMP but do not qualify for or complete a HAMP trial period plan.
Servicers are now eligible for additional incentive payments and can even get up to $3,000 in borrower relocation assistance payments.
They hope this will encourage more use of short sales and deeds instead of HAFA. But I keep getting foreclosure notices… what about that?
Foreclosure and loss mitigation are two separate processes handled by two different departments at most lenders and servicers. And often, they don’t speak very well to each other.
But the new guideline was published last week should help this a bit.
Clarifies lender contact requirements and defines “reasonable effort” by the servicer to contact borrowers.
Encourages early intervention by requiring proactive application from all borrowers who meet the HAMP eligibility profile and have missed two or more payments.
It sets minimum application requirements that include both phone and mail attempts.
Referral to foreclosure prohibited until a borrower is screened and determined to be ineligible for HAMP or until reasonable outreach efforts fail.
Requires servicers to stop foreclosure actions after a borrower enters a trial plan based on verified income.
Requires written certification that a borrower is not eligible for HAMP before an attorney or trustee can conduct a foreclosure sale.
Establishes a borrower response period of 30 days from the date of a notice of non-approval during which the foreclosure sale is prohibited.
Requires servicers to consider bankrupt borrowers for HAMP and removes barriers to HAMP screening. Allows the use of bankruptcy documents to verify income and a trial period waiver in some cases where a borrower is already operating under a bankruptcy plan.
The program is still optional
They added and changed a lot of things in HAMP last week (as we reported a couple of weeks ago), but one thing they haven’t changed is the program remains optional for lenders. If your lender doesn’t participate, there’s not much you can do about it, but most of the nation’s largest lenders, servicers, and investors have signed on.
