VA Launches HAMP Program for Distressed Borrowers
The Department of Veterans Affairs (VA) issued instructions for the implementation of a modification program under the terms of the Making Home Affordable Modification Program (HAMP), extending the federal system to apply to VA-insured mortgages. Prior to the implementation of the VA version of HAMP, servicers used several loss mitigation options for distressed VA mortgage borrowers, such as repayment plans, special forbearances and traditional loan modification programs. Servicers are expected to continue to use these programs first, leaving VA HAMP as the modification option of last resort. When the program takes effect Feb. 1, VA servicers will be required to try the VA HAMP option before making moves to oust the owner, such as a short sale, deed-in-lieu or foreclosure. To ensure veterans’ cases are heard in a timely manner, the VA is limiting interest payments on any claim under guaranty on an unsuccessful case to 210 days from the due date of the last paid installment plus the published timeframe for foreclosure in the state where the home is located. Servicers can use the VA HAMP workout plan so long as the borrower doesn’t qualify for traditional home retention loss mitigation, the property is the primary residence and the modification is agreed upon by December 31, 2012, the current HAMP expiration date. Another requirement of the VA HAMP is that servicers must complete a two-step net present value (NPV) calculation to verify that default is unavoidable and the borrower is ineligible for a workout plan. This is necessary to ensure a veteran receives appropriate consideration for loan modification, even when the VA guaranty makes foreclosure a more financially attractive option for a servicer, the department said. Servicers will calculate NPV both assuming the VA guarantees the loan and a second calculation that doesn’t take the guarantee into account. Write to Austin Kilgore.