In a Letter to Treasury Department, Bennet Says Common-Sense Change In Treasury Rules Would Prevent Unnecessary Foreclosures on Families' Homes
Washington, DC - Michael Bennet, U.S. Senator for Colorado, today sent a letter to the U.S. Treasury Department encouraging them to forbid mortgage providers from initiating or continuing the foreclosure process until they determine whether a homeowner is eligible for mortgage loan assistance through the Home Affordable Modification Program (HAMP). The Treasury is reportedly considering this change as part of its loan modification program.
In the letter to Herbert Allison, Assistant Secretary for Financial Stability in the Treasury Department, Bennet discussed how the parallel processes of foreclosure and evaluation for HAMP eligibility are confusing for homeowners and lead to foreclosures that could have been avoided.
"Given the enormity of the foreclosure crisis, we need to make every effort to keep families in their homes-particularly if they are eligible for a modification," the letter said. "This represents a common-sense way that we can keep more families in their homes during this difficult time."
Under current Treasury Department guidelines, the mortgage providers are only prohibited from initiating a foreclosure sale until the borrower has been evaluated for the program. Without this change, homeowners are receiving foreclosure notices while being evaluated for HAMP, which causes confusion and makes it much more likely that the foreclosure will ultimately go through. Bennet is pushing for a change that will allow more homeowners to take advantage of the HAMP program and keep more Colorado families in their homes.
The full text of the letter is included below.
The Honorable Herbert Allison, Jr.
Assistant Secretary for Financial Stability
United States Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
Dear Assistant Secretary Allison:
I write to request that the Treasury Department prohibit servicers participating in the Home Affordable Modification Program ("HAMP") from initiating the foreclosure process until they assess whether a homeowner is eligible for a modification. Similarly, if the foreclosure process has begun, it should be suspended until a borrower has been evaluated for a modification.
The Treasury Department's current guidelines only prohibit a servicer from initiating a foreclosure sale while determining a homeowner's eligibility for a modification. Specifically, the guidelines state:
To ensure that a borrower currently at risk of foreclosure has the opportunity to apply for the HAMP, servicers should not proceed with a foreclosure sale until the borrower has been evaluated for the program and, if eligible, an offer to participate in the HAMP has been made.
Home Affordable Modification Program, Supplemental Directive 09-01, p. 14 (Apr. 6, 2009).
The guidelines, therefore, permit the foreclosure process to operate on a parallel track as a HAMP modification. Unfortunately, the stress, confusion and uncertainty of an impending foreclosure may increase the likelihood of a miscommunication between a homeowner and a servicer or may complicate a borrower's efforts to obtain the necessary documents needed for a modification. The challenges of this parallel process make it significantly more likely that a servicer will ultimately foreclose on a homeowner who may otherwise be eligible for a modification. This is particularly true in non-judicial states, where the foreclosure process tends to occur at a significantly more rapid pace.
Finally, a family is more likely to leave their home if they receive a foreclosure notice, which ultimately disqualifies them from a HAMP modification.
Given the enormity of the foreclosure crisis, we need to make every effort to keep families in their homes-particularly if they are eligible for a modification. Yet disturbingly, the confusion and uncertainty associated with the current process allows too many families to fall in the cracks.
It is therefore my hope that the Treasury Department will prohibit servicers from initiating the foreclosure process while they evaluate whether a homeowner is eligible for a HAMP modification. The Department should also suspend the foreclosure process until the modification is complete, unless both the homeowner and the lender prefer to proceed as is. This represents a common-sense way that we can keep more families in their homes during this difficult time.
If you have any questions regarding the foregoing, please do not hesitate to contact me.
I look forward to your response. Thank you in advance for your attention to this matter.