Mortgage Daily Logo
mortgage news from industry experts

HUD Clarifies HAMP Credits Toward Settlement

While some principal reduction on mortgages with government loan modifications can be credited towards the recent mortgage servicer settlement, the vast majority of loans modified under the federal program won’t be eligible.

The Department of Housing and Urban Development says that incentives paid to servicers under the Home Affordable Modification Program cannot be used as credit towards the massive mortgage servicer settlement announced on Feb. 9.

HUD was responding to an article in the Financial Times that, it says, argues HAMP subsidies are being used for credit under the settlement.

A clause in the provisional agreement — which has not been made public — allows the banks to count future loan modifications made under a 2009 foreclosure-prevention initiative towards their restructuring obligations for the new settlement, according to people familiar with the matter,” the U.K. business publication wrote. “The existing $30bn initiative, the home affordable modification programme, or Hamp, provides taxpayer funds as an incentive to banks, third party investors and troubled borrowers to arrange loan modifications.”

But HUD says that the Financial Times got it wrong.

“In reality there is no such subsidy,” HUD’s public affairs department wrote in its online publication The HUDdle. “Servicers cannot use HAMP incentives to meet their obligations under the settlement, plain and simple.”

HUD explained that more than 95 percent of the 1 million HAMP modifications “done to date” don’t involve principal reduction. HAMPs with payment reduction that don’t include principal reduction don’t get credit towards the settlement.

“For HAMP modifications that do include principal reduction, servicers only receive credit for the portion of the principal reduction that they themselves pay for, not for the portion covered by incentives in the program,” HUD explained. “In other words, if a servicer receives a HAMP incentive of 40 cents for every dollar of principal reduction, it can receive credit at the applicable rate on the remaining 60 cents.”

The housing agency said that the settlement didn’t exempt servicers from HAMP requirements in order to preserve the program’s “extensive compliance regime, reporting requirements, and borrower-protection features.”

HUD explained that it didn’t exempt HAMP loans from the settlement entirely since that would have reduced the incentive for HAMP servicers to grant principal reduction — something the agency called a “perverse outcome.”

Popular posts

How Long Does It Take to Refinance a Mortgage
How Long Does It Take to Refinance a Mortgage

So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...

How Does Refinancing a Mortgage Work
How Does Refinancing a Mortgage Work

A home purchase is considered an investment, and a robust one at that. Savvy owners are constantly looking for new ways to reduce debt, save money, pay less in interest, and ultimately build equity. Refinancing is one way to leverage your investment and do just that....

What Does It Mean to Refinance Your Home
What Does It Mean to Refinance Your Home

You can think of refinancing your mortgage as a debt redo. Essentially, you’ll swap out the existing loan for a new one - ideally with better terms and conditions. Only this time it could help you save money on high mortgage payments, rather than just borrow it....

Setting up the Utilities in My New House
Setting up the Utilities in My New House

All the tedious, time-consuming home closing documents have been signed, sealed, and delivered. Your belongings are packed into what seems like a million boxes and you have a solid plan to haul all your existing furniture to the new place. Just as your boxes and...

When Is My First Mortgage Payment Due?
When Is My First Mortgage Payment Due?

Navigating your way through a brand new mortgage loan can be a difficult task, especially for first time homeowners. After handing over a large sum of money for the down payment and closing costs, it’s important to pay attention to the timing of your first mortgage...

Newsletter

Don’t worry, we don’t spam

calculate your monthly mortgage payment

Related Topics

Helpful Links

Daily mortgage rate trends

Best mortgage lenders

First-time homebuyers programs by state

Loan limits by state

Types of mortgages

APR vs interest rate

Understanding PMI

Related Posts

THE TRUSTED PROVIDER OF ACCURATE RATES AND FINANCIAL INFORMATION