Servicers of mortgages 60 days delinquent and over may be implementing more than 230,000 trial modifications
since the Home Affordable Modification Program (HAMP) began in March, but the largest non-profit organization representing such borrowers says more is needed to stop the "hemorrhage" of foreclosures across the nation.
The Association of Community Organizations for Reform Now (ACORN)
, in response to the Treasury announcement, calls for a full stop to foreclosure on any HAMP-eligible property, whether the borrower is committed or not. Additionally, ACORN wants servicers to explore alternative methods of aiding ailing borrowers, for example by principal forgiveness as opposed to forbearance. Furthermore, servicers are unevenly applying the program, they say, with little adherence to regulatory hurdles, such as in the inappropriate levying of modification fees onto the borrower.
"There is a great incentive [for servicers] to take part," says Brenda Muniz, legislative director at ACORN National. "Yet there are no consequences if [HAMP] is violated."
ACORN is also asking for the servicing arms of investment banks Barclays
(HomEq Servicing) and Goldman Sachs
(Litton Loan Servicing) to participate in the program.
However, the community activists admit sign-up rates from borrowers could be better, as currently around half of distressed borrowers engage their mortgage servicers on this front. ACORN community outreach programs attempt to address this issue, but the firm says it is undercapitalized to achieve significant traction in rebuilding the distressed borrower/servicer relationship.
HAMP is a federal program intended to insure foreclosure as a last option. The home must be owner-occupied and the mortgage originated before Jan. 2, 2009. Borrowers have to prove that their incomings fall short of monthly outgoings. This includes income beyond employment, such as alimony or child support payments. Under HAMP, If a borrower is in foreclosure, the foreclosure process is suspended while the borrower is being considered for the program.
Write to Jacob Gaffney