HAMP

Written By: Bonnie Wilt-Hild
Senior DE Underwriter & NAMP Instructor

I thought this week I would share some information on the HAMP program as administered by HUD and for those of you who are not sure what it is, its HUD’s loan modification program. I would think that this information will be more relevant to services that being banks or even mortgage lenders that have been forced to repurchase a case because it has gone into default and are now in a position where they must consider the modification due to borrowers request.

I recently found myself in that position due to a case that we were under obligation to repurchase. It was a first payment default and of course our investor very politely requested that we buy the case back. Our loan servicing department tried several different workout programs for the borrower but was unfortunately unable to design something that would allow the borrower to get the case current. The borrower then found out about the HAMP program and requested modification of the case due to their inability to make timely payments on the loan, this due to do unforeseen financial circumstances.

I want to first mention that some of the functions performed in order to meet criteria for a HAMP modification will really need to be completed by the underwriting department and HUD has provided pretty specific guidance as to what they expect from lenders in order consummate the modification on behalf of the borrower. The mortgagee letters that facilitate the guidelines are ML 2009-35, ML 2009-23, ML 2000-05 and finally ML 2008-21 with the latter two 35 and 23 providing the most comprehensive guidance.

There are basic program guidelines addressed in these letters which walk the loan servicer through the process of getting the modification completed for the borrower and are comprised of certain mortgage credit requirements including debt to income ratio’s which should be as close to 31% for HTI (no less than however) and no greater than 55% for total DTI. Lenders must also demonstrate that the borrower has made at least 4 regularly scheduled payments through out the course of the life of the mortgage in order to be eligible as well as demonstrate that the reason for the default was due to an unforeseen financial circumstance which impeded the borrowers ability to make the monthly mortgage payment as regularly scheduled. In other words, if it appears that the borrower intentionally defaulted on the debt in order to obtain a modification then the case will be ineligible.

There are also other considerations such as the trial period under which the borrower must make at least 3 payments under the proposed terms of the modification within the month due in order to consummate the modification. Without successful completion of these criteria the borrower will no longer be eligible under the FHA-HAMP program. If you are an underwriter in a small shop that thinks at some point you may be faced with completing some of these functions on behalf of your loss mitigation department I suggest you read up on the guidelines so you at least have a handle on what piece you may be expected to complete. Once you review the guidelines you can contact HUD’s national Servicing Center if you have additional questions at 888-297-8685. As always happy underwriting!

About the Writer. As an NAMP staff writer, Bonnie serves as a senior instructor for FHA Online University as well maintains a full-time job as Senior DE Underwriter for a major banking institution. If you would like to become a writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)