The Home Affordable Modification Program (a.k.a. HAMP) may be doing some good for a handful of people. But, if there is something that everyone agrees with, it is that the program needs some changes.
Alys Cohen and Diane Thompson of the National Consumer Law Center released a list of recommendations on July 6th that recommends greater visibility, principal reductions and access to the program for those in bankruptcy.
Greater Visibility:
Right now the Net Present Value (“NPV”) test used under HAMP to qualify borrowers for the program is not available to the public. As a result, homeowners seeking a modification are dependent on the servicers who are not motivated to modify a borrower’s loan, but are motivated to collect the debt and continue to accumulate fees and costs under their servicing agreements.
With no one monitoring the “negotiation” on the other end of the telephone line, who is to know whether the borrower qualifies or if the servicers are just playing games to get homeowners in fear of foreclosure to send them money with hopes of a modification.
Many homeowners are finding out that the money they sent to the servicer went to pay penalties and interest, not towards payments for their trial modification or towards paying down the principal of their loan.
Those in charge of reviewing homeowner situations, qualifying homeowners and making the modifications must have an interest in providing homeowners with relief. Homeowners need relief in order to prevent foreclosures and not simply delay them while payments are made to a servicer who only provides hope that a modification may occur sometime in the future.
Principal Reductions:
Forbearance works in some cases, but in most of the cases in California forbearance is none other than wishful thinking. Values have dropped so far in most areas that even if forbearance were applied to a borrower’s situation it would take years before the homeowner has any equity.
Without principal reductions most homeowners are left with no realistic option to keep their home and must turn to short sales, deeds in lieu of foreclosure, or surrender in bankruptcy.
Access to HAMP for those in Bankruptcy:
Currently HAMP guidelines allow servicers to decide whether or not they make modifications available to homeowners in bankruptcy. Cohen and Thompson recommend that HAMP guidelines provide clear guidance to servicers dealing with a homeowner in bankruptcy.
Specifically, they recommend the guidelines include;
1) Upon receipt of a bankruptcy filing, servicers be required to send information about the HAMP program to the debtor or debtor’s cousel,
2) Servicers should work through debtor”s counsel and offer appropriate laon modifications under the HAMP guidelines,
3) The bankruptcy trustee should be copied on all communications,and
4) The communications should not infer that it is in any way an attempt to collect a debt.
Conclusion
Everyone agrees that change is needed to provide relief to homeowners. I suppose part of the problem is that those interested in change are not as well funded or united as the banks and mortgage servicers paying our decision makers to bring about the change.
After all, who received billions of dollars in taxpayer money when they couldn’t pay their bills, over exteneded thier credit and made bad decisions? Those who have been provided relief continue to deny relief to the very people who made help available to them in the first instance.