On March 24, 2010, the Treasury Department announced new guidelines for handling pending or threatened foreclosure actions for lenders participating in the Home Affordable Modification Program (HAMP) effective June 1, 2010. Lenders participating in HAMP include Fannie Mae (FNMA) and Freddie Mac (FHLMC) loans, lenders accepting TARP funds, and other lenders who voluntarily agree to participate.
Under the new guidelines, a participating servicer or lender may not refer any loan to foreclosure or conduct a scheduled foreclosure sale unless and until at least one of the following circumstances exists:
- The borrower is evaluated for HAMP and is determined to be ineligible for the program; or
- The borrower is offered a trial period plan, but fails to make a trial period payment by the last day of the month in which such payment is due; or
- The servicer has established right party contact, has sent at least two written requests asking the borrower to supply required information in accordance with HAMP guidelines and has otherwise satisfied the Reasonable Effort solicitation standard, and the borrower failed to respond by the dates indicated in those requests; or
- The servicer has satisfied the Reasonable Effort solicitation standard without establishing right party contact; or
- The borrower or co-borrower states he or she is not interested in pursuing a HAMP modification and such statement is reflected by the servicer in their servicing system
Existing foreclosure sales must be immediately halted when a borrower submits a request for HAMP consideration, so long as the request is received at least 7 full days prior to the sale date. The only exception is where the sale cannot be stopped because the local official fails or refuses to halt some or all of the activities. For example, in some jurisdictions, a sale may not be stopped without the approval of the judge assigned to that case. The local judge may not be available or may otherwise not approve stopping the sale.
When a borrower is in foreclosure and is simultaneously either being evaluated for HAMP or is in a trial period plan, the servicer/lender must provide the borrower with a written notification that explains, in clear language, the concurrent modification and foreclosure processes and which states that even though certain foreclosure activities may continue, the home will not be sold at a foreclosure sale while the borrower is being considered for HAMP or while the borrower is making payments under a trial period plan.
Lenders need to review these new requirements carefully to make sure they are in compliance by June 1, 2010.
If you have any questions, please contact Mr. Jack Day, Esq. Jack is a Partner in the Bankruptcy department of the Cincinnati office of Weltman, Weinberg & Reis Co., LPA. He can be reached at 513-723-2206 or via e-mail at jday@weltman.com.
