While many laud HAMP 2.0 for helping struggling homeowners stay in their homes, at least one company is concerned about possible abuses.[IMAGE]
""Amherst Securities Group"":http://www.amherst.com/ expressed in a ""Mortgage Insight"" release worries about loopholes in eligibility requirements under the expanded HAMP program. The new program establishes criteria for investors to receive modifications, several of which are under scrutiny by Amherst.
The release specifically points to a rule that requires investors to pledge that they actually intend to rent the home; the requirement has no provisions about reporting on the investor's actual efforts to rent or on the income collected.
For example, an investor may try to get a loan modification on a vacation home by pledging to list it as a rental for at least five years. Once the loan is obtained, the applicant can list the home for a grossly inflated rental price, resulting in no interested leasers. Because the investor is technically making an attempt to rent, the modification is considered legitimate.
To rectify the problem, Amherst calls for an expansion of the rule that would require investors to submit a signed lease and third-party-verified evidence of occupancy at the property. SIGTARP issued a similar recommendation earlier this year.
""We argue that an investment property with no renter is far more akin to the case of an unemployed borrower; those persons generally do not receive modifications-they receive pay relief until they get a job; once employed, they are eligible for a modification. As such, the SIGTARP recommendation brings treatment of the rental property under HAMP 2.0 in line with HAMP 1.0 treatment of unemployed borrowers,"" said Amherst in its report.
""We had serious reservations when this program was first announced,"" the report read. ""With the program now in effect, we are very concerned about potential abuse among borrowers with rental properties[...]In particular, we believe the HAMP 2.0 program is structured such that borrowers owning rental property are incented to apply for modifications during periods when the property is not rented. We wholeheartedly support the SIGTARP recommendation to require a lease in place.""