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Tuesday, October 08, 2013

Making Home Affordable Program: Supplemental Directive 13-08

Are you currently applying for a HAMP loan modification? Then good news! If you are granted a HAMP trial period or permanent loan modification on or after March 1, 2014, you may have access to free financial counseling from your servicer!

Currently, Section 6.7 of Chapter II of the MHA Handbook, only borrowers with a total debt-to-income ratio of 55 percent are required to obtain HUD-approved financial counseling when they are approved for a Home Affordable Modification Program (HAMP) modification. These borrowers are at high risk of defaulting because they use over half of income just to satisfy their debts and have little income left over every month. It makes sense that these high-risk borrowers are required to speak with a counselor, but under this Section of the MHA Handbook, they are the only ones required to receive such counseling.
Now, under the Supplemental Directive 13-08, servicers must offer financial counseling to borrowers who have been granted a HAMP trial period plan or permanent modification regardless of the total debt-to-income ratio. More borrowers than ever before will now have access to free financial counseling from their servicers, provided that their servicers participate in HAMP, and either have enough money for HAMP ($75 million or more) or voluntarily choose to follow Supplemental Directive 13-08. This Supplemental Directive is effective March 1, 2014 and does not apply to loans that are owned, insured, or guaranteed by Fannie Mae, Freddie Mac, Veterans Administration, the Department of Agriculture’s Rural Housing Service (RHS), or the Federal Housing Administration (FHA). Even so, this Supplemental Directive will apply to many mortgage loans and affect millions of people who have been approved of a HAMP trial period or HAMP permanent modification.

The purpose of the financial counseling is to ensure that the borrowers are able to successfully complete their trial period plans and afford their permanent modified payments. Even borrowers who have already received a HAMP permanent modification before March 1, 2014 can receive financial counseling if they are at a high risk of default or believe they will be at risk in the future. It is an exciting opportunity for borrowers to receive free financial counseling from their servicers and for servicers to receive consistent monthly payments from every borrower who has received a HAMP modification.

Thank you to Lieb at Law's Assistant Case Manager, Jessica Vogele, for sharing this valuable information.