BofA Clarifies HAMP Mortgage Modifications to Borrowers
In response to consumers seeking a simplified explanation of credit products, Bank of America (BAC) will now provide a one-page summary of key terms to borrowers entering a permanent modification under the Home Affordable Modification Program (HAMP). Through HAMP, the US Treasury Department provides capped incentives to servicers for the modification of loans on the verge of foreclosure. According to a release from BofA, this new "Clarity Commitment," is an industry-led offering to simplify housing concepts. the concept was first introduced first mortgage borrowers in April and later extended the offering for home equity loans and reverse mortgages. Consumers and government panels demanded more transparency from BofA’s servicing platform after the bank posted a disproportionately industry-low 98 permanent modifications from March to December 2009 according to the Treasury. HAMP currently has more than 30,000 permanent modifications in total since its launch in March. Since then, Jack Schakett, the head of credit loss strategies at BofA, explained a new focus on converting trials into permanency. According to Schakett, BofA trimmed the number of borrowers in a HAMP trial who were missing documentation from 16,000 to 2,000 after a wave of notices was sent out following the Treasury’s report. BofA services 14m residential mortgages, more than any other financial institution. Since the start of 2008, BofA has modified nearly 615,000 mortgages, including 160,000 trial modifications through HAMP and more than 450,000 completed modifications through non-government programs. "Our Clarity Commitment for new mortgages has been very well received as a demonstration of our dedication to responsible lending and the creation of successful homeowners," said Rebecca Mairone, national servicing executive for Bank of America Home Loans. The handout summary clarifies the new principal balance and all charges included, the new interest rate, the total monthly payment at the outset of the loan at each point of adjustment and the initial amount of any escrow payment. For HAMP modifications, it summarizes incentive payments homeowners can earn toward reducing the principal balance if they make on-time payments for the first five years. "Modified mortgages may have considerably different terms than the original contract. As our customers transition to their new affordable payment, it is important that they have this simple and concise explanation of the terms of their modified loan," Mairone said. Write to Jon Prior. Disclosure: the author holds no relevant investments.