One of the most frustrating things about applying for a HAMP loan modification is the uncertainty. You look at the Making Home Affordable website and go through the checklist and realize that you definitely qualify. But it's your servicer that makes the final decision to modify your mortgage -- or not. If you have been denied for a HAMP modification, do you have any other options? Is it possible to appeal your denial?
Experts across the board have maintained that HAMP needs a formal appeal process. The Treasury Department claims it is working on one. This article will help you find out what you can do about a HAMP denial, and what programs are available if you have been declined.
Housing counselors not happy with mortgage servicers
Since 2007, the California Reinvestment Coalition has conducted five surveys of housing counseling agencies throughout California to see how mortgage modifications are going. The coalition found that 100 percent of housing counselors surveyed said that it is very common for mortgage servicers to re-request documents that the counselors had already submitted on behalf of their borrowers. Furthermore, 78 percent of counselors said it is also very common for servicers to deny loan modifications due to claims that they have not received all the borrower's documents. This information calls into question the validity of servicer modification denials. The Treasury's most recent report on HAMP's progress also cites incomplete documentation as a major cause of borrowers being kicked out of HAMP during their trial period.
Back in February 2010, an article in the Wall Street Journal indicated the Treasury Department was considering several changes that would give borrowers more chances to fight an unfair denial by their servicer. Most important, the proposed rule would require servicers to give borrowers 30 days after a denial of a HAMP application to respond to the denial. Under the proposed rule, servicers would also have to certify that a borrower failed to qualify for HAMP before they could foreclose.
No formal appeal process for HAMP yet
The Government Accountability Office (GAO) ripped the Treasury Department in a June 24 report, claiming that the Treasury had yet to fine a single mortgage loan servicer for HAMP noncompliance, despite the thousands of complaints from homeowners and housing counselors, lawsuits seeking class action status, and individual states themselves, several of which are proposing laws to enforce HAMP compliance.
But the Treasury had yet to even create a formal penalty schedule. The GAO says that the Treasury's lack of clear consequences "risks inconsistent treatment of servicer noncompliance and lacks transparency with respect to the severity of the steps it will take for specific types of noncompliance."
The Treasury's enforcement of the rules has been limited to prodding servicers to do better and requiring them to review borrowers' applications. While the Treasury has the contractual right to claw back TARP payments made to servicers, it has not done so even once, and it has refused to say why. Efforts to force servicer compliance have been shot down because mortgage lenders that received TARP money are allowed to opt out of the HAMP program altogether in the event of a "material change" in the terms.
You can reapply
As long as you weren't denied a HAMP loan modification because you failed to make your trial mortgage payments on time, you can reapply. You are entitled to get the reason that the mortgage lender declined your request; if you can show that the servicer's numbers or information is incorrect, or that your circumstances have changed, you get to reapply for HAMP. Some non-Fannie Mae or Freddie Mac lenders, however, only allow one crack at HAMP, and unfortunately, they get to make up their own rules. Here's what HUD's Supplemental Directive 10-01 says:
A borrower who has been evaluated for HAMP but does not meet the minimum eligibility
criteria described in the "HAMP Eligibility" section of Supplemental Directive 09-01 or who
meets the minimum eligibility criteria but is not qualified for HAMP by virtue of a negative NPV
result, excessive forbearance, or other financial reason, may request reconsideration for HAMP at
a future time if they experience a change in circumstance.
If you decide to take another run at HAMP, look for the required forms on your lender's website, or download a HAMP application package from www.hmpadmin.com. Be sure to tell your lender that you are reapplying for HAMP, and continue to pay your modified trial payment during the process. Call weekly to make sure that your mortgage servicer has received the new package. Carefully document every call, and call after every fax to verify that the paperwork has been received and that it is what was requested. Then the fun begins all over again.