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The Treasury Department will cap the amount of mortgage modifications property investors can receive under a revamped Home Affordable Modification Program, officials said this week, to no more than a handful.
In January, the Obama administration expanded the program to allow homes occupied by someone other than the owner. There were other changes as well, including higher incentives for reducing principal, writing down second liens and loosened debt-to-income qualifications.
Before the changes, HAMP was expected to reach roughly 800,000 borrowers after redefaults are factored in, according to the Congressional Oversight Panel. Banking analysts anticipate the revamped program to add 500,000 more borrowers.
The Treasury will likely cap the amount of properties an investor can get modifications on, probably around four, Darius Kingsley, chief of homeownership preservation office at the Treasury, said in an interview.
"We have some people asking, 'Why would you help investors?' Well, we're not helping hedge funds or investment companies with large inventories of homes. The change was meant to help individuals with one, two to three investment properties," Kingsley said.
Official guidance on the cap and what hardship an investor must show will be sent to mortgage servicers in the next few weeks, Kingsley added.
Laurie Maggiano, director of policy at the Treasury's homeownership preservation office, said investors will have to show intentions to rent out the home over the long term.
"The idea is to make sure the modification is going toward a property with someone living there year round," Maggiano said the Mortgage Bankers Association servicing conference in Orlando, Fla. Thursday.
How long term an investor must rent out the property is still to be determined.
"For individuals living in hard-hit cities, it doesn't matter if an empty home was owned by an investor or not," Kingsley said. "The thing that matters is to keep foreclosures and abandoned inventory down as much as possible."
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