Freddie Mac (Government Sponsored Enterprises, or GSEs) or serviced by over 100
participating Non-GSE servicers. A list of participating Non-GSE servicers can be found on the
MHA Web site.
On March 26, 2010, the Treasury Department announced that homeowners in active
bankruptcy with Non-GSE loans are eligible for HAMP if they request a modification. More
information on HAMP bankruptcy guidance is available in Chapter II of the MHA Handbook for
Servicers of Non-GSE Mortgages available at www.HMPadmin.com. In August 2010, Freddie
Mac adopted bankruptcy provisions similar to Treasury’s except for one important difference:
Freddie Mac does not allow modified loans to be paid through the trustee. To date, Fannie Mae
has not adopted similar guidance, however; homeowners in bankruptcy with Fannie Mae loans
may obtain a HAMP modification in the servicer’s discretion.
To be considered for HAMP, a homeowner must live in an owner-occupied principal
residence, have a mortgage balance less than $729,750 for a one-unit property, have monthly
payments on the first mortgage that are greater than 31 percent of their income and demonstrate
financial hardship. HAMP focuses on affordability in an effort to ensure that homeowners who
hope to remain in their homes are able to afford the modified mortgage payment. Every
modification under HAMP is required to lower the homeowner’s monthly mortgage payment to
31 percent of the homeowner’s monthly gross (pre-tax) income, a level estimated to provide
reasonable assurance that the modification will be sustainable. The proposed modification terms
are then evaluated using a Net Present Value (NPV) calculation, which analyzes the cost/benefit
of the loan modification to the investor. If the NPV with the proposed HAMP modification is
greater than the NPV without the HAMP modification, the result is deemed “positive” and the
servicer must offer the modification.
Before a mortgage is permanently modified, the homeowner must make the new, reduced
monthly mortgage payment on time and in full during a trial period of three months to
demonstrate that the modified monthly payment will be sustainable. After the three-month trial
period is complete, the homeowner should be converted to a permanent modification.
HAMP Update
Treasury recently issued new guidance related to the case escalations process. Effective
February 1, 2011, servicers were required to implement specific requirements designed to
enhance the process for handling homeowner inquiries and disputes related to MHA. Each
servicer must designate personnel trained in MHA guidance who possess the necessary authority
to resolve cases and assist homeowners. Under the guidance, servicers must track escalated cases
from a variety of sources and conduct reviews in a timely manner. More information is available
in Section 3 of Chapter I of the MHA Handbook for Servicers of Non-GSE Mortgages.
Additionally, if a homeowner is not approved for HAMP, the servicer must now send a
list of the homeowner and mortgage-related NPV input fields and the values used in the NPV
calculation to evaluate the homeowner for HAMP in the homeowner’s Non-Approval Notice.
The purpose of providing the NPV input values is to allow a homeowner who is ineligible
because the transaction is NPV negative the opportunity to correct any information that may