Magazine article American Banker

Payment Reductions Should Continue after HAMP Expires: Regulators

Magazine article American Banker

Payment Reductions Should Continue after HAMP Expires: Regulators

Article excerpt

Byline: Brian Collins

WASHINGTON -- Federal regulators warned mortgage servicers Monday that they will still expect them to offer loan modifications to distressed homeowners even after the Home Affordable Modification Program expires at yearend.

In a joint white paper from the Treasury Department, Department of Housing and Urban Development and Federal Housing Finance Agency, the agencies said they will keep an eye on mortgage servicers.

"Going forward, Treasury, HUD and FHFA will continue engaging with a variety of stakeholders -- particularly mortgage servicers -- to assess how foreclosure alternative options will incorporate and further develop the core principles presented in the white paper," the paper said.

Prior to the foreclosure crisis, servicers usually added unpaid interest and fees to the mortgage balance, which created additional burdens on struggling homeowners.

The HAMP program proved that a 10% reduction in mortgage payments consistently reduced re-defaults. And "deeper payment reduction consistently outperformed modifications with smaller payment reduction," the white paper says.

The white paper outlines five principles that the agencies believe were essential to the success of the government's programs and should provide a foundation for any future loss mitigation programs. The principles are:

Accessibility: Ensuring that there is a simple process in place for homeowners to seek mortgage assistance and that as many homeowners as possible are able to easily obtain the needed and appropriate level of assistance. …

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