Are you one of the countless homeowners who tried to obtain a loan modification under HAMP (the government’s Home Affordable Modification Program) but were denied? If so you may not have been given a reason, which makes all the time you spent, the hopes you harbored, the pages and pages of documentation you compiled, seem like a complete waste of time. Disclosure requirements have now changed for loan modification denials under HAMP, making it doubtful others will go through the same difficulties.
As of February 1 of this year lenders are required to send disclosure letters to some borrowers who applied for modifications under HAMP but were denied. Yes, I said “some,” so not everyone will receive such information (and I am not sure how this is determined). The letters must reveal up to 33 data points. These are points that the servicer uses to determine whether the borrower qualifies under HAMP, in order to satisfy the net present value (NPV) test. The goal is to make sure the new loan would be in the lender’s best interests so as to prevent future default.
If the borrower feels information used to deny the modification was incorrect, he may appeal the modification to the servicer within 30 days of receipt of the letter. Appeals must be in writing, supported by evidence explaining the perceived correct values. An example is if the home was valued incorrectly. If the borrower has a recent appraisal that changes the valuation she could present that as evidence in the appeal process.
The U.S. Treasury Department is currently creating a website where borrowers will be able to go to run their own HAMP tests to see if they meet the HAMP criteria for a modification. The site should be ready in late springtime. It may be of help to those who want to understand the 51 HAMP data points that are taken into consideration when applying for a modification under the program.