Common use of Rules and Guidelines Clause in Contracts

Rules and Guidelines. HAMP enumerates certain general eligibility criteria that a borrower must meet to qualify for a HAMP loan modification, and the GSEs have published specific guidelines as to how HAMP is to be administered with respect to their loans. Only qualified borrowers may receive a HAMP modification. To qualify, the borrower must submit a HAMP application and all required documentation to the mortgage servicer. The servicer must then review the paperwork to determine if the borrower satisfies the prescribed income-to-housing debt ratio and other requirements. If so, the borrower must complete a trial period. The servicer will provide the borrower with an estimated modified mortgage payment and ask the borrower to sign a “trial period plan.” The trial period is supposed to last for a specified duration, either three or four months depending on the type of loan and whether the borrower is current or delinquent on his or her mortgage. If a qualified borrower makes his modified mortgage payment for each of the trial period months, the servicer must make the modification permanent. Under GSE guidelines, until June 2010, servicers had two options for determining if a borrower qualified under HAMP: the verified-income or the stated-income approach. Under the verified-income approach, a borrower provided the required documentation to the servicer and the servicer determined if the borrower qualified before the borrower received a trial period plan. If the qualified borrower made the required modified payments under the trial period plan, the borrower’s loan was then permanently modified. Under the stated-income approach, a servicer could offer a trial period plan to a borrower if the servicer anticipated that the borrower would qualify based on certain verbal information provided by the borrower to the servicer. Under this approach, the servicer would then confirm whether the borrower qualified by receiving from the borrower and reviewing all necessary documentation during the trial period. HAMP required that the servicer make an eligibility determination prior to the completion of the three- or four-month trial period. Starting in November 2009, HAMP required that the servicer make this determination during the first month of the trial period. Just as with the verified-income approach, upon successful completion of the trial period, a qualified borrower would receive a permanent modification. The HAMP guidelines also provide requirements for how the servicers are to administer HAMP and provide certain protections for borrowers on trial plans, including how borrowers are reported to credit bureaus, how their trial payments will be credited to their original loan balances, and how any arrearages accumulated during the trial period should be handled. The guidelines also provide specific instructions on how the servicer must communicate with borrowers about their applications, the qualifying process, and the trial period. As a general matter, the servicer must provide borrowers with clear and understandable written information about the material terms, costs, and risks of the modified mortgage loan in a timely manner to enable borrowers to make informed decisions. SunTrust runs the day-to-day operations of its HAMP program through the Loss Mitigation Division of its Default Department. In 2009 and 2010, Loss Mitigation administered HAMP through three primary personnel functions: (1) call team members who answered the phones when homeowners called to apply or had questions about HAMP; (2) negotiators who actually worked the homeowners’ files to determine if the homeowners qualified, sent the homeowners the requisite paperwork, and communicated the ultimate decision to the homeowners; and (3) fulfillment, who processed the homeowners’ trial payments, informed the negotiators when the homeowner made the last of the required trial period payments, and managed the suspense accounts. SunTrust initially implemented HAMP for its GSE portfolio in April 2009 using the verified-income approach. Starting in August 2009, the U.S. Department of Treasury’s Office of Financial Stability began publicly publishing the number of HAMP modifications processed by all servicers through a monthly “Making Home Affordable Program Servicer Report.” As of July 2009, SunTrust had approximately 5,500 borrowers who had applied for HAMP but who were waiting for SunTrust to decide if they qualified; SunTrust had placed 1,800 borrowers into a trial period plan; and SunTrust had not awarded any permanent HAMP modifications.