Servicers are now required to evaluate mortgage loans backed by the two GSEs and
actively reach out to borrowers to offer a streamlined loan modification if the
mortgage loan was previously modified to include a step-rate feature (which
allows for a gradual rate increase in the first few years) and if the mortgage
rate becomes 60 days delinquent in the first 12 months following a rate
increase.
The updates to the servicing requirements also removed the requirement that a
servicer must immediately pursue a short sale, a mortgage release, or
foreclosure proceedings against a borrower should the loan become 60 or more
days delinquent within 12 months after the effective date of the loan
modification.
The GSEs have made the updates to their servicing programs in order to
assist the borrowers who originally modified their mortgage loans through
Treasury's Home Affordable Modification Program (HAMP) in 2010 whose five-year
modifications are due
to reset this year. The streamlined loan modification option is in place to
prevent those HAMP borrowers who may not be able to absorb the higher payments
that come with interest rate increases when their modifications reset from
defaulting – or in some cases, re-defaulting.
About 511,000 HAMP modifications
with a 2010 vintage are due to reset in 2015; according to Treasury, about 41
percent of those were 90 or more days delinquent 42 months after the
modification became permanent. Treasury also has programs in place to help
borrowers handle the rate increases, or "step-ups," and avoid re-defaulting.
Only a small percentage of borrowers who default or re-default on HAMP
modifications actually go to foreclosure, according to Mark McArdle, Chief
Homeownership Preservation Officer at Treasury. Most are able to work out a
solution to avoid foreclosure.
See my post later today for what this all might mean to you!
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