Sunday, January 31, 2010

HAMP changes.

The HAMP insanity continues. Back in July of last year the administration took servicers to task for not offering enough trial modifications. The servicers said it was because they asked for a minor amount of paperwork from the borrower first since it made no sense to start a trial mod if there was zero hope of the borrower getting a modification. The administration, wanting to hit their announced trial mod number, said that wasn't good enough and that anyone calling for a HAMP mod should immediately be put in a trial mod. This had the effect of the administration hitting their announced modification number. Then it turns out very few of the trial mods were turning into full modifications. Turns out many of the borrowers wouldn't qualify for a full modification and many months were lost and the losses built up. So what does the administration do? It now has brilliantly directed that servicers shouldn't put any borrower in a trial mod without getting some basic paperwork from them first.

One of the good news that came out of the latest directive is a bit of sense of dealing with reality. The directive stated that trial mods that missed payment or missed the majority of the paperwork should be kicked out and go into "foreclosure alternative" (short sale / deed in lieu) phase. That is good news in that the stagnant market might be getting some more supply on the market. The sooner we get to dealing with the facts on the ground instead of dreaming up pie in the sky magic bullets the sooner we will be done with this mess.

You can read all the HAMP changes coming here.

Note: Although this post sounds vaguely optimistic, I fully realize that the administration is working on another modification proposal and that we will be going back to fantasy land soon enough.

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