White-collar criminals and unemployment income cut from HAMP eligibilty
New guidelines from Fannie Mae and the Treasury Department out this week are restricting the eligible income of borrowers considered for the Home Affordable Modification Program. The mandates will also disqualify criminals convicted of certain white-collar offenses. The Treasury launched HAMP in March 2009 to provide incentives to servicers for the modification of loans on the verge of foreclosure. Servicers must reduce interest rates, extend the term limits or reduce principal until the borrower has a monthly mortgage payment at 31% of his or her monthly income. But Fannie Mae has is eliminating unemployment benefits, even severance payments, as an allowable source of income when evaluating a borrower for HAMP or any of its proprietary modification programs. Servicers require current income information and expenses in order to reach that 31% ratio. This new policy will go into effect Nov. 1. So far, servicers participating in HAMP have permanently modified 468,058 mortgages through August, but the monthly amount dropped 27% as fewer trial modifications are coming into the system. The Treasury announced this week new guidance prohibiting borrowers from HAMP, who have convicted of illegal mortgage or real estate transactions in the last 10 years. Borrowers are not eligible for the program if their criminal history shows tax evasion, money laundering, felony larceny, theft, fraud or forgery. This policy, which was designed under the Dodd-Frank Act went into effect Sept. 21 and applies to HAMP, 2MP, the Federal Housing Administration version of HAMP and the Home Affordable Foreclosure Alternatives program. Write to Jon Prior.