FHA HAMP Effort Gains Traction with Servicers

A Federal Housing Administration loan modification program that was rolled out in August is gaining traction with larger residential servicers. "We're seeing some surprising activity with that program," FHA commissioner David Stevens told National Mortgage News. The FHA 'Home Affordable Modification Program' (HAMP) allows servicers to reduce the current principal amount of an existing FHA mortgage by up to 30% to make the monthly payments affordable. Servicers can file partial claims for the principal reduction and the borrowers end up carrying a zero-interest lien for the deferred principal. HAMP is a permanent program that also allows servicers to reduce the interest rate, extend the term of the loan and employ all of FHA's loss mitigation tools, said Bob Lyons, a servicing consultant with Lyons and McCloskey in Fairfax Station, Va. "FHA HAMP is all the home retention options rolled into one and supercharged," Mr. Lyons said.