The U.S. Treasury Department has altered the structure of incentive payments available to servicers under the Home Affordable Modification Program (HAMP). The new incentives are provided on a sliding scale whereby the later in the delinquency cycle that a loan enters HAMP, the lower the payment is to the servicer.
The updated incentives will apply to all permanent HAMP modifications with a trial period plan (TPP) effective date on or after Oct. 1, the Treasury announced this week.
If a loan enters the TPP before or on the 120th day of delinquency, the incentive amount will be $1,600. For loans that are between 121 and 210 days delinquent, the incentive drops to $1,200. For loans that enter a TPP after being delinquent for more than 210 days, servicers will receive a much-reduced payment of $400.
Pay-for-success incentive payments, as well as incentives to borrowers and investors, remain unchanged.
Also starting Oct. 1, the Treasury will eliminate the $500 incentive that is available to servicers that modify current and performing loans under HAMP.
The Treasury's guidance also states that "following a servicer's standard collection efforts and during consideration of a borrower for HAMP, servicers may not take additional collection measures for the purpose of reducing the delinquency period in order to qualify for a higher up-front servicer incentive."
The Making Home Affordable compliance division of Freddie Mac will audit loan payment histories to ensure that such activities do not occur, the Treasury said.
