Report: HAMP Applicants Foreclosed On

By:: Kara Johnson | August 17, 2011

Hoping for a government-backed loan modification on a Fannie Mae mortgage? Better do it before you fall more than 12 months behind on your mortgage, according to a recent report.

Fannie Mae has been directing mortgage servicers to proceed with foreclosure when mortgages are more than 12 months overdue, even when the homeowners were being considered for loan modification under the federal Home Affordable Modification Program (HAMP). That’s according to an investigation by the Detroit Free Press, which published the results in a three-part series beginning Sunday.

According to the Free Press investigation, Fannie Mae directed lenders to proceed with foreclosure against homeowners who were actively seeking HAMP loan modifications, contrary to Fannie Mae’s own declared policies and the government’s rules for HAMP. The paper cited confidential records it obtained that detailed correspondence between Fannie Mae and lenders responsible for servicing the mortgages in question.

In the correspondence, Fannie Mae cited a newly implemented “delay initiative” requiring that all mortgages more than 12 months past due must be on an active payment plan with monthly payments coming in order to avoid foreclosure. Requests for postponement in the absence of such a plan were denied.

The report on the investigation did not address how a homeowner might go about arranging such a payment plan while pursuing a HAMP loan modification; a loan modification is in itself a type of alternate payment plan.

One of the ongoing problems with the HAMP initiative has been that many homeowners have reported that their lenders have told them that they must be delinquent on their mortgage to be considered for a HAMP loan modification, contrary to the government’s rules for the program.

Fannie Mae officials contacted for the report declined to comment on the cases of specific homeowners. However, representatives of mortgage servicers said that in at least some cases, homeowners had failed to submit necessary documents or missed deadlines for filing requests or submitting documents. Homeowners, on the other hand, complained of getting the run-around from their mortgage servicers despite submitting requested information.

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