The Treasury Department today announced sweeping improvements to the way servicers actively solicit borrowers for participation in the Home Affordable Modification Program (HAMP), even from the protection of bankruptcy. Herbert Allison, Jr., Treasury assistant secretary for financial stability, in testimony to the House Committee on Oversight and Government Reform, said despite industry-wide criticism of HAMP’s slow start, the program is on track to meet original goal of providing trial modifications to 3-4m homeowners by 2012. He noted that, of the $50bn in Troubled Asset Relief Program (TARP) funds for HAMP, the Treasury only distributed $57m through February, primarily in up-front servicer payments. Other incentives will be disbursed over time, he added, estimating that over the five-year life of those same modifications, Treasury will pay out up to $775m in additional homeowner, investor and servicer incentives. The Treasury is rolling out improvements to servicer communication requirements with borrowers in HAMP, to increase the reach of the program. Allison announced that servicers must pursue early intervention, pre-screening every borrower that misses two or more payments to determine eligibility for HAMP and soliciting those qualifying borrowers for HAMP participation. This change encourages servicers to reach out to the borrower as early as 31 days of delinquency when the chance for homeownership retention is best, according to a supplemental directive on the changes provided to HousingWire. Under the changes, servicers must not refer any borrower to foreclosure until potential eligibility for HAMP is ruled out or the borrower fails to respond to solicitation efforts. Treasury said defining “reasonable solicitation efforts” is necessary to allow servicers to proceed with normal debt collection actions when borrowers are not responsive. The changes establish timeframes for HAMP evaluation – in particular stipulating homeowners can expect a modification decision within 30 days. Servicers must provide “clear, written explanation” to borrowers already in foreclosure of what they can expect of concurrent foreclosure and HAMP evaluation actions, according to the changes. Servicers must ensure foreclosure attorneys and trustees are aware of a borrower’s HAMP status. Additionally, servicers must consider bankruptcy-protected borrowers for HAMP if a request is received from the borrower, legal counsel or bankruptcy trustee. These changes take effect June 1, 2010 in conjunction with fully verified trial period plans with the first payment due on or after June 1st. Write to Diana Golobay.