Over the past 7 years, the foreclosure prevention programs put into place by Treasury, HUD and FHFA have greatly changed how the mortgage servicing industry has engaged with and helped out struggling homeowners.
In all, via government programs as well as efforts from the private sector, 10.5 million modification & mortgage assistance arrangements occurred between April 2009 and the end of May 2016.
What’s more, Making Home Affordable (MHA) and other homeowner assistance programs led to improved homeowner engagement in the process of loss mitigation. It also resulted in fresh guidelines for the kinds of loss mitigation options homeowners have, and standard procedures for providing those products. The programs supported the housing market’s recovery and showed that a mortgage modification can be a sustainable option for homeowners looking to avoid foreclosure.
The MHA programs will close at the end of the year, and mortgage servicers will no longer need to evaluate homeowners for a mortgage modification, such as the Home Affordable Modification Program (HAMP).
Since 2009, government agencies, servicers, investors and consumer advocates have collaborated to stabilize the housing market and help homeowners avoid foreclosure following the financial crisis.
So, why should banks keep working with borrowers after HAMP?
The white paper that was released particularly outlines five specific principles that the agencies believe were essential to the success of the government’s programs. These principles should additionally provide a foundation for any future loss mitigation programs:
Accessibility: Ensuring that there is a simple process in place for homeowners to seek mortgage assistance and that homeowners can easily get assistance.
Accountability: Making sure there’s an appropriate level of oversight in the process to get mortgage assistance.
Affordability: Giving homeowners payment relief that addresses the needs of the homeowner, the servicer and the investor to bolster long-term performance.
Sustainability: Offering solutions that help resolve the delinquency and be effective long-term.
Transparency: Making sure that the process to get assistance, and the terms of that assistance, are understandable to homeowners. Also, ensuring that info about options and their utilization is available to the appropriate parties.
The white paper further highlighted the creation of framework for a universal loss mitigation program for the future, when the Home Affordable Modification Program (HAMP) expires at the end of the year.
“We aim to help consumers avoid foreclosures, which upset their personal and financial lives,” CFPB Director Richard Cordray stated in a press release. “The modification program was put in place to provide alternatives to foreclosure. Our principles will serve as helpful guardrails for servicers, investors, and regulators to consider as we continue to protect consumers who are struggling to pay their mortgages.”
The CFPB is calling for mortgage lenders, housing finance agencies and investors to create affordable and sustainable loss mitigation programs that are accessible and transparent for borrowers.
The bureau said the five aforementioned principles are flexible enough to apply to various approaches, including forbearance, short sales, repayment plans, loan modifications, and deeds-in-lieu of foreclosure.
HAMP expires in January of 2017. Regulators are running on a general agreement that the government’s procedures and guidelines regarding loss mitigation, especially engaging with borrowers, should continue.
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