HAMP Update: Guidance to Expedite Permanent Modifications

February 1, 2010

On January 28, 2010, the Treasury Department and Department of Housing and Urban Development (HUD)  released updated guidance for the mortgage servicers who initiate the modifications and monitor the trial periods.  The guidance refines the documentation requirements and other procedures in order to expedite conversions of current trial modifications to permanent ones.

Guidance Details

Supplemental Directive 10-01 provides guidance on two major issues:

  1. Converting Borrowers in the Temporary Review Period to Permanent Modifications

In December 2009, the Treasury implemented a review period through January 31, 2010 to provide servicers additional time to collect and submit missing documentation for borrowers in trial modifications, to require that borrowers be notified of any missing documents, and to give borrowers an opportunity to dispute and correct any erroneous information in their applications. Today’s guidance clarifies for servicers the proper procedures for conversion of those borrowers who are current on their monthly payments to permanent modifications.

Acknowledgement and Review of Initial Package

Within 10 business days following receipt of an Initial Package, the mortgage servicer must acknowledge in writing the borrower’s request for HAMP participation by sending the borrower confirmation that the Initial Package was received, and a description of the mortgage servicer’s evaluation process and timeline. If the Initial Package is received from the borrower via e-mail, the servicer may e-mail the acknowledgment. Servicers must maintain evidence of the date of receipt of the borrower’s Initial Package in its records.

Within 30 calendar days from the date an Initial Package is received, the mortgage servicer must review the documentation provided by the borrower for completeness. If the documentation is incomplete, the mortgage servicer must send the borrower an Incomplete Information Notice in accordance with the guidance set forth in the “Incomplete Information Notice” section below. If the borrower’s documentation is complete, the servicer must either:

  1. Send the borrower a Trial Period Plan Notice; or
  2. Make a determination that the borrower is not eligible for HAMP and communicate this determination to the borrower in accordance with the Borrower Notice guidance provided in Supplemental Directive 09-08.

A single written communication sent within 10 days of receipt of a borrower’s request for HAMP participation may also include, at the mortgage servicer’s discretion, the results of its review of the Initial Package. Mortgage servicers are reminded that Supplemental Directive 09-01 generally prohibits servicers from proceeding with a foreclosure sale for any potentially eligible mortgage loan until the borrower has been evaluated for eligibility under HAMP and has been determined to be ineligible or has declined a trial period plan offer.

 Incomplete Information Notice

If the mortgage servicer receives an incomplete Initial Package or needs additional documentation to verify the borrower’s eligibility and income, the servicer must send the borrower an Incomplete Information Notice that lists the additional required verification documentation. The Incomplete Information Notice must include a specific date by which the documentation must be received, which must be no less than 30 calendar days from the date of the notice. If the documents are not received by the date specified in the notice, the servicer must make one additional attempt to contact the borrower in writing regarding the incomplete documents. This additional notice must include the specific date by which the documentation must be received, which must be no less than 15 calendar days from the date of the second notice. If a borrower is unresponsive to these requests for documentation the servicer may discontinue document collection efforts and determine the borrower to be ineligible for HAMP. If the borrower is determined to be ineligible for HAMP, the servicer must communicate this determination to the borrower in accordance with the Borrower Notice guidance provided in Supplemental Directive 09-08.

Trial Period Plan Approval

Within 30 calendar days following receipt of an Initial Package or complete verification documents, the mortgage servicer must complete its verification and evaluate the borrower’s eligibility for HAMP and, if the borrower is qualified, send the borrower a Trial Period Plan Notice. If the borrower is determined to be ineligible for HAMP, the servicer must communicate this determination to the borrower in accordance with the Borrower Notice guidance provided in Supplemental Directive 09-08. Servicers are reminded that Supplemental Directive 09-01 prohibits servicers from initiating a new foreclosure action while a borrower is in a trial period plan.

Consideration for Alternative Loss Mitigation Options

When a borrower is determined to be ineligible for a HAMP modification, the servicer is required to consider that borrower for all other available loss mitigation options, including but not limited to refinance, forbearance, non-HAMP modifications and, to the extent a borrower does not qualify for a home retention alternative, Home Affordable Foreclosure Alternatives (short sales or deeds in lieu of foreclosure) under Supplemental Directive 09-09. As required in Supplemental Directive 09-08, available loss mitigation options should be described in the Non-Approval Notice.

Conversation from Trial to Permanent Modification:

Servicers must use a two-step process for HAMP modifications. Following underwriting and a determination that the borrower qualifies for a HAMP trial modification, servicers will place qualified borrowers in a trial period plan by preparing and sending a Trial Period Plan Notice to the borrower describing the terms of the trial modification and the payment due dates. Borrowers who make all trial period payments timely and who satisfy all other trial period requirements will be offered a permanent HAMP modification.

Step 1 – Trial Period Plan Start

The trial period is 3 months in duration (or longer if necessary to comply with applicable contractual obligations). Borrowers are not required to sign or return the Trial Period Plan Notice. Servicers should retain a copy of the Trial Period Plan Notice in the borrower file and note the date that it was sent to the borrower. Receipt of the first payment due under the trial period plan on or before the last day of the month in which the first payment is due is evidence of the borrower’s acceptance of the trial period plan and its terms and conditions. The effective date of the trial period will be set forth in the trial period plan and is the 1st day of the month in which the first trial period plan payment is due.

Step 2 – Conversion to Permanent

The borrower must be current under the terms of the trial period plan at the end of the trial period to receive a permanent loan modification. “Current” in this context is defined as the borrower having made each required trial period payment by the last day of the month in which it is due.

Borrowers who fail to make current trial period payments are considered to have failed the trial period and are not eligible for a HAMP modification. Servicers are instructed to use good business judgment in determining whether trial period payments were received timely or if mitigating circumstances caused the payment to be late. Exceptions should be documented in the servicing record.

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HAMP Update: Documentation Collection Process

January 30, 2010

On January 28, 2010, the Treasury Department and Department of Housing and Urban Development (HUD)  released updated guidance for the mortgage servicers who initiate the modifications and monitor the trial periods.  The guidance refines the documentation requirements and other procedures in order to expedite conversions of current trial modifications to permanent ones.

Phyllis Caldwell, Chief of Treasury’s Homeownership Preservation Office states that the “guidance represents our commitment to more efficiently move qualified homeowners into permanent modifications.”

“Increasing the number of borrowers receiving permanent modifications under HAMP is critical to our efforts to preserve affordable and sustainable homeownership,” said HUD Senior Advisor for Housing Finance William Apgar. “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.

Guidance Details

Supplemental Directive 10-01 provides guidance on two major issues:

  1. New Requirements that Documentation be Provided Before Trial Modification Begins

A simple, standard package of documents will be required prior to the servicer’s evaluation of the borrower for a trial modification.  This process will be required for all new HAMP modifications that became effective after June 1, 2010, although mortgage servicers may implement it sooner.  The following documents, referred to as the “Initial Package” must include:

Step 1 – Complete the RMA Form

The RMA Form provides the servicer with borrower and co-borrower financial information including the cause of the borrower’s hardship. The financial information and hardship sections of the RMA must be completed and executed by the borrower and, if applicable, the co-borrower. The RMA also solicits data related to the race, ethnicity and gender of the borrower and co-borrower, referred to as Government Monitoring Data (GMD). The borrower and co-borrower are not required to provide GMD. Servicers may not refuse to accept an RMA because the borrower or co-borrower did not complete this section. Click here for instructions for completing the form.

Servicers may require use of the RMA by all borrowers requesting consideration for HAMP or may continue to use other proprietary financial information forms that are substantially similar in content to the RMA. When provided by or on behalf of the borrower, the RMA form must be accepted by servicers in lieu of any servicer specific form(s). When the RMA is not used, servicers must obtain an executed MHA Hardship Affidavit.

Step 2 – Complete the IRS Form 4506-T or 4506T-EZ

The IRS Form 4506-T or 4506T-EZ gives permission to your mortgage servicer to request a copy of your most recent tax return you have filed with the Internal Revenue Service (IRS). After you have completed the form, print two copies – one for your records and one to send to your mortgage servicer. Only one taxpayer is required to sign to Tax Form. Click here for instructions for completing the form.

Step 3 – Gather Evidence of Income

Your mortgage servicer is required to verify your income to ensure that the modified mortgage payments will be affordable for you.  The type of documentation you need to provide depends on the source of your income. The simple Proof of Income Checklist will tell you what documents you need to collect if you are a wage earner, self-employed, or receive retirement income.  Be sure to make copies of your income documentation and keep the originals for your records.

***Note: The income evidence and financial information provided by the borrower may not be more than 90 days old as of the date the Initial Package is received by the mortgage servicer.***

Step 4 – Send the Documentation to your Servicer

After you complete, print, and sign the RMA and Tax Form, send these documents, along with your proof of income, to your mortgage servicer.  You will find the correct mailing address and fax number at Contact Your Mortgage Servicer.

***Note: For all documents required by Treasury (other than the Tax Form), electronic submission and signatures are acceptable.***


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