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Tuesday, May 10, 2016

Making Home Affordable Program to End in 2016

The U.S. Department of Treasury (Treasury) recently released Supplemental Directive (SD) 16-03 (MHA Program Termination and Borrower Application Sunset II) to the Making Home Affordable (MHA) handbook, containing “sunset” provisions for its MHA program. The release of this Supplemental Directive signals that there will be no further extensions of the program.

The Making Home Affordable program was announced in 2009, by the Obama Administration, as a relief to distressed homeowners. The MHA program’s objective is to provide guidelines to lenders to modify the terms of eligible mortgages so that “at-risk” homeowners would be able to reduce their monthly mortgage payments and to avoid foreclosure. According to the most recent MHA Program Performance Report, during the last 7 years, the MHA program has only helped 2.5 million of the 7 to 9 million homeowners that were identified as “at-risk” by the Obama Administration in 2009. This means that the remaining 4.5 to 6.5 million “at-risk” homeowners who do not submit their request for borrower assistance by December 31, 2016, will be faced with foreclosure.

SD 16-03 provides the following modifications to the MHA handbook for winding down the program:
  • All borrower requests for assistance under MHA must be submitted by December 31, 2016;
  • On December 1, 2017, MHA Help and the Home Affordable Modification Program (HAMP) Solution Center will no longer accept new cases, nor escalate cases to servicers;
  • All cases that have been escalated prior to December 1, 2017 must be resolved by May 1, 2018;
  • After December 30, 2016, servicers will no longer be required to assign relationship managers to borrowers;
  • Effective May 1, 2018, servicers will no longer be required to follow Section 3 of Chapter 1 of the MHA Handbook; however, the Treasury suggests that servicers continue to follow the best practices that have been established by MHA;
  • After September 1, 2016, servicers are no longer required to satisfy the Reasonable Effort standard set forth in Section 2.2.1 of Chapter II of the MHA handbook; and
  • Servicers will not be required to suspend a scheduled foreclosure sale if a borrower submits an Initial Package after December 30, 2016.
After continuously developing and expanding the MHA program over the last 7 years, it is surprising that Congress has refused to extend its life. Since 2009, the Treasury has issued 5 versions of its MHA handbook and has issued over 80 Supplemental Directives, including SD 16-03, refining the guidance it has provided to participating servicers. Congress’ decision to abandon the MHA program seems misguided because of the time and resources it has invested in the program. Most importantly, the termination of the program on December 31, 2016, leaves up to 6.5 million “at-risk” homeowners scrambling to submit requests for assistance or face the possibility of foreclosure.