More Help for Mortgage Modifiers

Article excerpt

The "10 Steps to Defusing Loan-Mod Bombs" article (published online at www.ababj.com and in the May print and digital editions of ABA Banking Journal) cautions banks about the compliance traps that banks need to watch out for when helping consumers with mortgage refinancings and modifications, including the prohibition under the Home Mortgage Disclosure Act (HMDA) against requesting government monitoring information (race, sex, and ethnicity) from borrowers for loan modifications. Banks that are following the Obama Administration's new Homeowner Affordability Modification Program (HAMP) have additional compliance challenges in knowing when the normal rules don't apply.

On April 21, 2009, the U.S. Treasury Department issued Supplemental Directive 09-02 that makes an exception to the normal rules concerning requests for government monitoring information for mortgage loans. The new directive requires loan servicers who are participating in the HAMP to request, as part of the HAMP Hardship Affidavit, the borrowers' race, ethnicity, and sex, even if the loan is not normally subject to data collection compliance requirements.

The process is familiar. The loan servicer is required to request the government monitoring information. If the borrowers elect not to provide the information, and the Hardship Affidavit is completed in a face-to-face interview, the servicer is required to record the information based on visual observation or surname. …