Administration Updates MHA, Clarifies HAFA Eligibility

The Obama administration has announced updates to the Making Home Affordable (MHA) program.

New Supplemental Directive 11-10 provides administrative clarifications and updates to the Home Affordable Modification Program (HAMP), the Second Lien Modification Program, the Home Affordable Unemployment Program and the Home Affordable Foreclosure Alternatives (HAFA) program, as well as amends and supersedes portions of the MHA Handbook.

The new guidance extends certain protections to borrowers who were incorrectly denied a HAMP trial period plan. The MHA Handbook describes the scenario in which an eligible borrower successfully completes his or her trial period but, for reasons beyond the borrower's control, the loan is not timely converted into a permanent modification. In those cases, the Handbook requires servicers to offer permanent HAMP modifications that put the borrowers in the same position as if they had converted timely. Supplemental Directive 11-10 extends this guidance to trial period plans.

"If a servicer determines on or after the date of this Supplemental Directive, as the result of an escalation, through the servicer's internal quality-control process or through an [MHA-Compliance] review, that a borrower was incorrectly denied a trial period plan, the servicer must offer the borrower a trial period plan based on the status of the borrower and loan at the time of the servicer's initial evaluation," the directive says. Additionally, servicers must, "to the greatest extent possible," put the borrower in the same position as he or she would have been had the servicer offered the trial period plan in accordance with MHA guidelines.

The administration has also clarified HAFA eligibility requirements, easing rules to enable more transactions on properties owned by servicemembers. Effective immediately, MHA guidance has been amended to allow a servicemember's "permanent change of station" order as a basis for financial hardship when requesting HAFA, even if the servicemember's income has not decreased. The key provision to the amendment is that borrowers must lack sufficient liquid assets to make their monthly mortgage payments.

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