HAMP Trials Keep Risk Weighting, FDIC Rules

Mortgages in the three-month trial period of a Making Home Affordable Modification Program (HAMP) workout plan are eligible for the same risk weighting treatment as mortgages with permanent modifications, according to final rule revisions issued by the Federal Deposit Insurance Corp. (FDIC). In a final rule issued earlier this month, the FDIC said mortgages fully secured by first liens and meet other criteria previously weighted at 50% — meaning the lender takes on that much risk and can recover at least that much in the event the loan defaults — can keep the same weighting. A mortgage risk weighted at 100% prior to modification should continue to be weighted at 100% during and after the trial period, including loans 90 or more days delinquent and in nonaccrual status. But, the FDIC said, a 100% weighted loan can return to 50% after a sustained period of repayment performance. In addition, if the borrower does not successfully complete the trial period and the loan is not permanently modified, the loan still qualifies for the 50% risk weighting if it meets the conditions to be a qualifying mortgage loan under the general risk-based capital rules, FDIC said. If not, it should be weighted at 100%. Under HAMP, the Treasury Department provides financial incentives to mortgage servicers who modify the loans of borrowers on the verge of foreclosure. Write to Austin Kilgore.

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