Fitch: HAMP Sunset Could Lead To Greater Inconsistency In Modifications

A report from Fitch Ratings says the sunsetting of the Home Affordable Modification Program (HAMP) on Dec. 31 could have a significant impact on struggling borrowers.

Although it is by no means the only way to get a modification, the program accounted for approximately 50% of all loan modifications completed this year, the report finds.

With HAMP’s elimination, there could be “fewer loan modifications, with those completed coming from proprietary modification programs with quicker decision-making for struggling U.S. homeowners,” Fitch says.

Meanwhile, delinquencies and foreclosures have been dropping precipitously throughout the year as the economy improves and home prices increase. HAMP monthly applications have dropped to approximately 70% of what they were when the program was launched in 2009.

Fitch thinks that the resulting increase in proprietary modifications will result in “less consistency of servicer modification approaches across the industry.”

However, “modification decision timelines will shorten, which may lead to a modest reduction in liquidation timelines,” the firm says.

In September, the Mortgage Bankers Association (MBA) introduced a proposed successor program to HAMP. Dubbed “One Mod: Principles For Post-HAMP Loan Modifications,” it was developed by The Future of Loss Mitigation Task Force, a diverse MBA working group consisting of representatives from 20 member companies.

The MBA says the group’s goal is to formulate universal principles that should be applied to a future program.

In August, the Federal Housing Finance Agency (FHFA) announced that HAMP’s sister program, the Home Affordable Refinance Program (HARP), had been extended for a third time to September 2017.

However, this time around, the program is being extended in order to create a “bridge” to a new high loan-to-value streamlined refinance offering that will essentially replace HARP.

So far, the FHFA has not announced any successor program to HAMP.


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