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HAMP's operation means that there will no longer be a standardised damage reduction programme covering all kinds of service providers and investors. Nevertheless, regulators have continued to stress the importance of losses reduction programmes and have been encouraging interest groups to consider guidance guidelines for further losses reduction programmes. Furthermore, changes to the Consumer Financial Protection Bureau's (CFPB) regulations on the provision of mortgages services, which improve the protection of borrowers against losses, are expected to come into force this year.
Flex Mod was designed by The Enterprises on instructions from the Federal Housing Agency (FHFA), taking into account certain HAMP components, contributions from various sector players and characteristics of standard and streamline modifications made by companies. The Flex Mod can be used for credits that are 60 day or more past due, or for credits that are currently past due or less than 60 day past due when there is a potential credit loss.
Service personnel must adhere to the company's current damage reduction assessment hierarchy before deploying a Flex Mod. Service employees are obliged to assess borrower under Flex Mod by 1 October 2017 at the latest. Mr Mac began evaluating borrower for a Flex Mod Trial Period Plan on 15 February 2017 and is planning to update his system to enable reporting from 1 May 2017.
Whilst service personnel are allowed to use the standard and streamline changes before 1 October, service personnel must cease using the current programmes as soon as they begin assessing creditors under Flex Mod. The Flex Modification approval conditions are similar to the Standard and Streamline changes, with slight changes to the approval disclaimers.
Borrower less than 90 day overdue are obliged to file a Borrower Response Package. The Flex-Mod aims at a 20 per cent decrease in payments and a 40 per cent relation between living costs and incomes for such borrower. Optimized reserves are available for borrower 90-day or longer in arrears; these borrower are not obligated to provide a borrower response package, and the programme aims to reduce payments by 20 per cent.
In order to be entitled to claim, a hypothec must have been concluded at least 12 month before the valuation date for the Flex modification. FHA, VA and RHS backed credits are not suitable for the programme (although, as described below, such credits may be suitable for these agencies' harm reduction programmes).
Service employees are entitled to incentives in conjunction with Flex Mod. Fannie Mae's incentives will be the same as those for an optimized change to Fannie Mae. Freddie Mac incentives will conform to the Freddie Mac Standard andstreamlined modifications. Flex Models follows the expiry of HAMP, which was launched by the US Treasury in 2009 in reaction to the 2009 MHA program.
In order to help borrower prevent defaults and foreclosures, HAMP has provided a unified, standardised losses reduction procedure for all service provider and type of investment to help borrower make better loan repayments at an accessible and sustained level. The HAMP granted an incentivising remuneration to service providers, creditors and private equity holders after notification of a lasting change. During the years following the adoption of HAMP, further harm reduction initiatives were introduced under the HAMP, such as the Home Affordable Foreclosure Alternatives Program (HAFA), and harm reduction activities under HAMP were extended.
HAMP's closing date for submissions was 30 December 2016. In the case of proposals lodged before that date, the date of entry into force of the amendment must be on or before 1 December 2017. In order to be eligible for a Streamline HAMP amendment after 30 December 2016, the Mortgagor must have filed (and satisfy certain other criteria) at least one element of a claim for relief on or before that date and the amendment must take effect on or before 1 December 2017.
A service provider may renew a Streamline HAMP offering for a borrower who defaults on or after December 31, 2016 with a HAMP testing schedule, provided certain requirements are satisfied and the perpetual change takes effect on or before December 1, 2017. Even though the submission date has passed, Treasury pays an incentivised fee for durable changes notified before 1 May 2018 after the April 2018 financial year.
When a change is finalized by December 1, 2017, but not notified before May 1, 2018, Treasury does not make incentivization fees, and for non-GSE debt, the service provider must continue to comply with all conditions of the change, for example, paying inducements to the borrowers, service providers or investors. The FHA, VA and Rural Development have each established their own damage reduction programmes, known as FHA-HAMP,3 VA-HAMP4 and RD HAMP (RD Special Loan Servicing), for credits secured or covered by governments.
Furthermore, under Treasury FHA-HAMP and RD-HAMP, debtors and service providers are entitled to incentives from Treasury. In order to be entitled to participate, the Mortgagor must have submitted a variation application in writing on or before 30 December 2016 and the entry into force of the perpetual amendment must be on or before 1 December 2017.
Irrespective of these terms for treasury incentives, the agency-specific hazard management programmes will remain available after December 2016. CFPB published its own paper in August 2016 setting out a set of policies for mitigating losses in a post-HAMP context and stating that these policies should be based on, but differ from, the CFPB's, the regulator's and the law enforcement authorities' policies for serving mortgages.
CFPB's maintenance policy does not oblige a service provider to offer a particular harm reduction policy but CFPB considers that the policy acts as a "regulatory guideline" for the harm reduction litigation. While the CFPB cannot prescribe a particular harm reduction policy choice, over the years it has paid considerable attention to harm reduction matters through its regulation work, prudential monitoring exercise, news bulletins and implementation work.
CFPB's regulations on the service of mortgages, which came into force in January 2014 and already include some HAMP and SAI service levels in the service levels included in Regulation X, such as the ban on double jeopardy of debtors for enforcement and harm reduction, the obligation to give debtors a point of reference during harm reduction, and the obligation to establish contacts with overdue debtors during a certain timeframe.
CFPB issued a definitive serving regulation (the 2016 rule) in 2016 which, among other things, improves protection for borrowers in the area of damage-reduction. Regulation 2016 reviews and specifies a number of the harm reduction rules of Regulation X, which include, but are not restricted to, the following: Service providers are obliged to comply with the harm reduction requirement more than once during the term of a loan when a creditor is informed of payment between harm reduction uses.
After receipt of a full claim for compensation, a service provider must inform the Mortgagor in writing within five workdays. In the event that a debtor applies for full relief of losses more than 37 calendar days prior to a forced sales, a service provider may not move for a sell order or carry out a forced sales, except in certain specified conditions.
When a service provider joins the enforcement proceedings of a higher or lower lien holder, it is not necessary to delay until a debtor is more than 120 consecutive and overdue. In the event that a Transfereeservicer is granted a loan for which a claim for harm reduction is outstanding, the Transfereeservicer must adhere to the harm reduction time windows that applied to the Transfereeservicer.
Regulation 2016 also provides for new measures on the protection of consumers of interested replacements. Thus, for example, a certified interest rate heir has the same right as a borrowers when it comes to losses reduction under Regulation X. The extended losses reduction provision of Regulation 2016 is to take effect on 19 October 2017, while the rules on heirs are to take effect in the interest of 19 April 2018.
Whilst HAMP may no longer be eligible for funding from creditors, company- and agency-specific claims reduction programmes remain available and it is anticipated that retail investor will further refine their own claims reduction offers. An important complement to these programmes is for service personnel to work conscientiously on operationalising and enforcing the changes to the GFPB's service policies, which, once in place, will place important demands on service personnel to provide opportunities for borrower attrition.