‘Critical’ Waiver Should Speed Up Mortgage Redos

Mortgage servicers have been complaining about processing hurdles in the government’s Home Affordable Modification Program, or HAMP, and now a new waiver effective today could be the first step to streamline the foreclosure-rescue plan.
U.S. officials today said the “critical HAMP waiver” would eliminate the protracted process of re-starting a trial mortgage modification if the borrower’s income “exceeds by 25 percent” the income information used initially to start the trial period. Borrowers are subject to re-evaluations of their income status after a certain trial period.
“With the issuance of this waiver, borrowers are no longer required to restart the trial period,” said a statement by administrators of the HAMP program today. “The trial period payments would not be adjusted, but the permanent modification terms would be based on the borrower’s higher verified income.”
Officials said the waiver can be applied retroactively to all borrowers whose trial periods have been restarted based on the original rule.
“Therefore, a borrower who is currently in a restarted trial period can be immediately converted to a permanent modification if they have made at least three (or four, if required) trial period payments under their combined original and restarted trial periods,” the new guidelines read.
The rule that the waiver eliminates represents the kind of red-tape that lenders have been complaining about for months.
“We continue to work very hard to convert customers from a trial modification to a permanent modification that lowers their monthly payment, but it has been a struggle,” conceded Charlie Scharf, head of Retail Financial Services at Chase, part of JPMorgan Chase & Co., in a statement last week.
Chase had announced that it had offered 568,000 modifications on more than $100 billion of mortgages in 2009, with more than 83,000 already permanent.
The government’s handling of HAMP has come under fire by the program’s Congressional Oversight Panel and by mortgage industry experts testifying before Congress. Their main assertion: HAMP doesn’t go far enough to reduce mortgage balances and address the issue of negative equities.