Freddie Mac 2009 Annual Report Download - page 138

After the final trial-period payment is received by our servicer and the borrower has provided necessary
documentation, the borrower and servicer will enter into the modification.
• Servicers will be paid a $1,000 incentive fee when they originally modify a loan and an additional $500 incentive fee
if the loan was current when it entered the trial period (i.e., where default was imminent but had not yet occurred). In
addition, servicers will receive up to $1,000 for any modification that reduces a borrower’s monthly payment by 6%
or more, in each of the first three years after the modification, as long as the modified loan remains current.
• Borrowers whose loans are modified through HAMP will accrue monthly incentive payments that will be applied
annually to reduce up to $1,000 of their principal, per year, for five years, as long as they are making timely
payments under the modified loan terms.
• HAMP applies to loans originated on or before January 1, 2009, and borrowers’ requests for such modifications will
be considered until December 31, 2012.
Of the HAMP modifications completed as of December 31, 2009, the borrower’s monthly payment was reduced, on
average, $609, which amounts to an average of $7,308 per year, and $102 million in annual reductions for all of our
completed HAMP modifications. Although mortgage investors under the MHA Program are entitled to certain subsidies from
Treasury for reducing the borrowers’ monthly payments from 38% to 31% of the borrower’s income, we will not receive
such subsidies on modified mortgages owned or guaranteed by us.
Table 49 presents the number of single-family loans that completed or were in process of modification under HAMP as
of December 31, 2009.
Table 49 — Single-Family Home Affordable Modification Program Volume
(1)
Amount
(2)
Number of Loans
(3)
As of
December 31, 2009
(dollars in millions)
Completed HAMP modifications
(4)
...................................................... $ 3,127 13,927
Loans in the HAMP trial period ........................................................ $28,151 129,380
(1) Based on information reported by our servicers to the MHA Program administrator.
(2) For loans in the HAMP trial period, this reflects the loan balance prior to modification. For completed HAMP modifications, the amount represents the
balance of loans after modification under HAMP.
(3) FHFA reported approximately 152,000 loans were in active trial periods as of December 31, 2009, which includes loans in the trial period regardlessof
the first payment date. FHFA also reported 19,500 permanent modifications under HAMP as of December 31, 2009, which includes modifications that
are pending the borrower’s acceptance.
(4) Completed HAMP modifications are those where the borrower has made the last trial period payment, has provided the required documentation to the
servicer and the modification has become effective.
During 2009, approximately 8,400 borrowers, or 6% of those starting the program, dropped out of the HAMP trial
period process, primarily due to either the failure to continue trial period payments or the failure to provide the income or
other required documentation of the program. On January 28, 2010, Treasury issued guidelines that are intended to facilitate
resolution of the cases of borrowers who have failed to provide required income documentation during their HAMP trial
periods. In accordance with the Treasury guidelines, we instructed our servicers to notify borrowers who are currently in
HAMP trial periods that failure to submit income documentation would result in ineligibility for a HAMP modification. The
Treasury guidelines also provide that, beginning with trial periods that take effect on or after June 1, 2010, borrowers must
provide income documentation before entering into a HAMP trial period. However, we urged our servicers to implement this
requirement sooner, if possible.
We have undertaken several initiatives designed to increase the number of loans that complete the trial period process
under HAMP, including:
• engaging a vendor to help ease backlogs at several servicers by processing requests for HAMP modifications;
• engaging a vendor to meet with eligible borrowers at their homes and help them complete required documentation;
and
• implementing a second-look program designed to ensure that borrowers are being properly considered for HAMP
modifications. Borrowers who do not qualify for HAMP are then considered under our other foreclosure prevention
programs.
HAMP provides uniform guidelines for the modification not only of troubled mortgages owned or guaranteed by us or
by Fannie Mae, but also for troubled mortgages held by others, or non-GSE mortgages. In contrast to the modifications of
mortgages held or guaranteed by us or Fannie Mae, Treasury will pay compensation to the holder of each modified non-GSE
mortgage equal to half the reduction in the borrower’s monthly payment (less than half in a case where the borrower’s pre-
modification monthly payment exceeded 38% of his or her income). In cases where we are a holder of securities backed by
such mortgages, we expect that a share of this compensation will be distributable to us, in accordance with the governing
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