RealEstateEconomyWatch.com

With foreclosures forecast to break all-time records well into next year, the Treasury Department and the Department of Housing and Urban Development (HUD) today announced their third attempt to breathe life into the Obama Administration’s ailing Home Affordable Modification Program (HAMP).

 Since fewer than 2,000 homeowners nationwide have successfully modified their mortgages nine months after the Administration’s $75 billion program launched, Administration officials announced four changes to make it easier for defaulting borrowers to participate in the program.  They also threatened lenders who drag their feet on servicing modifications with penalties, including fines and other unnamed sanctions.

 Changes announced today include: 

• Extending the period for trial modifications started on or before September 1^st to give homeowners more time to submit required information;  
• Streamlining the application process to minimize paperwork and simplify the submission process; meeting regularly with servicers to identify necessary improvement to borrower outreach and responsiveness;  
• Developing operational metrics to hold servicers accountable for their performance, which will soon be reported publicly; and 
• Enhancing borrower resources on the MakingHomeAffordable.gov website and the Homeowner’s HOPE^TM Hotline (888-995-HOPE) to provide direct access to tools and housing counselors.

“We are encouraged by the pace at which trial modifications are now being made to provide immediate savings to struggling homeowners,” said the recently hired Chief of Treasury’s Homeownership Preservation Office (HPO), Phyllis Caldwell. “We now must refocus our efforts on the conversion phase to ensure that borrowers and servicers know what their responsibilities are in converting trial modifications to permanent ones.”

Reuters, ABC, CNBC and other national news outlets earlier today cited  ”Administrations sources” that the White House would announce a new initiative that will include “naming and shaming” lenders to accelerate loan modifications by highlighting firms that are lagging in that area.

By the time the initiative was announced hours later, it had been downgraded to a joint Treasury-HUD news release and contained no “naming and shaming.” 

 It does require that lenders servicing loans will be required to submit a schedule demonstrating their plans to reach a decision on each loan for which they have documentation and to communicate either a modification agreement or denial letter to those borrowers.   

 Next month Treasury announced it will report progress on permanent modifications as well as the number of active trial period modifications that may convert by the end of the year if all borrower documents are successfully submitted, sorted by servicer and date.

 Last summer, in order to put pressure on servicers, the Administration began releasing results of each servicer’s progress.  However, last month it did not release an updated number of permanent modifications, apparently because there were so few.  In September, there were fewer than 2000.