Yesterday, the U.S. Department of Treasury and Department of Housing and Urban Development (HUD) released updated guidance for servicers participating in the Home Affordable Modification Program (HAMP). The new guidance is intended to expedite conversions of current trial modifications to permanent ones by refining the documentation requirements under HAMP. According to HUD Senior Advisor for Housing Finance William Apgar, “[I]ncreasing the number of borrowers receiving permanent modifications under HAMP is critical to our efforts to preserve affordable and sustainable ownership. While we continue to meet our goals to provide immediate assistance, the updates announced today should enable servicers to transition borrowers more quickly and easily from trial to permanent modification.”

Supplemental Directive 10-01 provides guidance on two major issues:

  1. Provide “Initial Package” Documentation Before Trial Modification Begins: Key documents, including proof of income and request for modification and affidavit form, must be obtained from the borrower before the servicer may evaluate the borrower for HAMP. This new process will be required for all HAMP modifications with effective dates after June 1, 2010. Under this new guidance, within 30 calendar days after receipt of the Initial Package, a servicer must evaluate the borrower’s eligibility for HAMP and send the borrower a Trial Period Plan Notice, if eligible.
  2. Conversion from Trial to Permanent Modification: Supplemental Directive 09-10 implemented a temporary review period for all active HAMP modifications scheduled to expire on or before January 10. 2010, under which servicers were not permitted to cancel active HAMP trial modifications for reasons other than the failure to meet HAMP property eligibility requirements. The guidance today clarifies the proper procedures for converting borrowers current on their payments to permanent modifications.