The Department of Treasury [1] is currently preparing for the winding down of its Home Affordable Modification Program (HAMP), which is scheduled to expire on December 30, 2016.
HAMP originally began in February 2009 as part of Treasury’s Making Home Affordable [2] (MHA) initiative, which was created in response to the massive amount of foreclosures and defaults that occurred during the financial crisis.
The program was originally scheduled to expire at the end of 2013, but has been extended twice and is now set to expire at the end of this year. According to Treasury, HAMP has helped 1.8 million families and completed 2.3 million homeowner assistance actions. But the program has also indirectly helped millions of struggling homeowners, according to Mark McArdle, Deputy Assistant Secretary of Financial Stability at Treasury.
“We changed how borrowers were reviewed and evaluated for assistance. We set standards for affordability that changed how modifications were done, not just HAMP mods,” McArdle said. “And we set standards like SPOC (single point of contact) and restricted dual tracking a modification and foreclosure that were adopted by CFPB (Consumer Financial Protection Bureau) and became industry norms.”
Treasury officially began winding down MHA [3] in early March when it issued its first set of guidelines [4] to servicers for MHA program termination in the form of Supplemental Directive (SD) 16-02 [4].
“We changed how borrowers were reviewed and evaluated for assistance. We set standards for affordability that changed how modifications were done, not just HAMP mods.”
Mark McArdle, Treasury
“What we’re looking to accomplish as we wind the program down is to make sure we have an efficient and effective transition to life after HAMP,” said Danielle Johnson-Kutch, Acting Chief of the Homeownership Preservation Office at Treasury. “We also continue to work with stakeholders to make sure that the lessons learned over the past seven years about accessibility, affordability, transparency and accountability remain in place and continue to be a part of the toolkit for assistance to struggling homeowners now and in the future.”
The Department has created a “toolkit” for the future, after the expiration of HAMP, that includes tools such as a principal reduction alternative, a first and second lien modification program, and post modification counseling, in order to assist struggling borrowers and prevent them from defaulting or re-defaulting.
“We also will look to work with stakeholders to make sure that the good work we’ve done over the past seven years and the toolkit that we’ve established is in place and can be pulled out again if it’s needed in the future,” Johnson-Kutch said.
Treasury is facilitating conversations in the industry in order to get servicers thinking about standardization in a post-HAMP world for borrowers who are at risk of default after the program expires.
“Can there be a common application?” McArdle said. “Can there be elements of the process that remain consistent so homeowners are not as confused as they were before HAMP when every servicer had a different loss mitigation program that varied significantly by investor? We’re doing what we can to increase standardization and transparency in whatever comes after HAMP."
Editor’s note: Danielle Johnson-Kutch will be a speaker at the 2016 Five Star Government Forum [5] on March 31 in Washington, D.C.