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Loan Modification Process Status Report

(8/23/10)

The HAMP program was launched with high hopes of curtailing the housing crisis however the truth several years later is that it has only made a dent. The key problem with the loss mitigation effort seems to be borrower documentation or more specifically the lack thereof. Proactively reaching out to borrowers, along with improving the borrower's upfront documentation, are two key linchpins of loan modification success. Having a clear and accurate picture of a borrower's financial situation is essential to assessing the risk involved in modifying the loan. If a borrower is overburdened with additional non-mortgage debt the chances of achieving a successful modification are limited. In the early days of the loan modification effort, stated but unverified information from the borrower was accepted just as it had been in the loan process leading up to the crisis. Unfortunately as a result of this ill conceived process, many of the borrowers who went through the loan modification process in 2008 and 2009 only returned to the same pattern of re-defaulting on their loans. Working off of verbal, unverified information followed by subsequent attempts at trial loan modifications only proved in the end that the information being supplied was false to begin with.

Recruiting and training staff to work in overwhelmed servicing units has proven to be another challenge that has been difficult to meet. Educating consumers so that they are fully informed of their options is critical to achieving a successful outcome in the loan modification process. Timely decisions from servicers providing detailed terms and specifics as to what can successfully be achieved on behalf of a borrower, is also essential. Dragging the loan modification on for too long can result in futile and wasted efforts if the foreclosure process only ends up outpacing it and a prospective loan modification seeking borrower is left homeless in the end.

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