Treasury May Introduce New Guidelines For Mortgage Lenders Under HAMP

The Wall Street Journal reported yesterday that the U.S. Treasury may introduce new guidelines for mortgage lenders to give distressed borrowers more time to try and qualify for the Home Affordable Modification Program (HAMP).

Among other proposed changes, loan servicers would have to give borrowers 30 days to respond after they are denied a loan modification under HAMP, allowing them to appeal against the decision. Loan servicers would also have to provide a written certification that a borrower is not eligible under HAMP before putting up the property for foreclosure. Servicers may also be required to contact borrowers who are otherwise eligible for HAMP, but have fallen behind on payments for 60 days or more. These proposed changes are expected to slow down the foreclosure process.

The $75 billion Home Affordable Modification Program was created to provide aid to nearly 4 million homeowners. The program provides financial incentives to mortgage companies and investors to modify home loans and prevent foreclosures. 

Under the program, borrowers are first put into trial modifications for three months to ascertain whether they can make the new payments and to give them time to submit the paperwork before the loan modification becomes permanent.