BofA First to Join HAMP Program for Second Liens
Bank of America (BAC) signed the first agreement to participate in the second-lien mortgage modification initiative under the Home Affordable Modification Program (HAMP), the bank confirmed Tuesday afternoon. Through HAMP, the U.S. Treasury Department allocates capped incentives to servicers that pursue modifications of first mortgages at risk for foreclosure. So far, the HAMP program for second liens — announced in April 2009 and added to the HAMP Web site with administrative process apparently in place -- had yet to result in a single servicer contract, prompting some to wonder whether the program was on hold. Calculated Risk, for example, said housing economist Tom Lawler received an email that the program was on hold. In December, industry professionals urged House lawmakers to ensure HAMP addresses second liens and the conflicts of interest that can sometimes arise when servicers of second liens also service first mortgages. The agreement with BofA indicates servicer approval for participation may be gaining momentum. BofA already has infrastructure in place to execute second lien modifications under the Second Lien Modification Program (2MP) once regulators release final program policies and guidelines, according to an e-mailed statement Tuesday. BofA indicated the release of guidelines may be coming soon, although a time frame for execution has not yet been announced. 2MP will call for modifications that reduce monthly payments on qualifying home equity loans and lines of credit under certain conditions, including the completion of a HAMP modification of the first mortgage. “For many homeowners facing severe financial difficulty, decreasing the payment on the first mortgage without a reduction in the payment on the second lien may not produce an affordable combined mortgage payment,” said Bank of America Home Loans president Barbara Desoer. Industry sources on the securitization side say HAMP must address the issue of second liens. At a congressional hearing in early December, officials told House lawmakers a clearinghouse might be required to mediate between first and second lien holders until a modification can be agreed upon. Treasury spokesperson Meg Reilly earlier this month denied 2MP was on hold: “Because there has not been a systematic method of notification to second lien holders when a first lien on the same property is modified, ramp-up has taken some time.” Write to Diana Golobay. Disclaimer: The author holds no relevant investment positions.