Begun as the government's response to the foreclosure crisis, the Treasury Department's Home Affordable Modification Program wasn't supposed to last forever.
The Dec. 31 end of the foreclosure relief program, which offered a more affordable payment by adjusting interest rates, extending the loan term, and reducing or forbearing principal, will leave a gap that the government is trying to fill.
The Consumer Financial Protection Bureau, created under the Dodd-Frank Act of 2010, is proposing consumer protection principles to guide mortgage servicers, investors, government housing agencies, and policy makers as they develop foreclosure-relief solutions to replace what is better known by its acronym, HAMP.
The Home Affordable Refinance Program, known as HARP, which was designed to help homeowners who have seen a drop in home values refinance with better mortgage terms, also expires Dec. 31.
Although the rates of foreclosure are much lower than they were when HAMP and HARP were created in 2009, some states, including New Jersey, are still struggling with them.
Nationally, however, there were just 533,813 U.S. properties with foreclosure filings in the first six months of 2016, down 20 percent from the previous six months and down 11 percent from the first six months of 2015, said Daren Blomquist, senior vice president at RealtyTrac of Irvine, Calif.
The consumer protection bureau's proposals are designed to "inform the discussion of potential options to help prevent avoidable foreclosures," it said.
Proposed features include access to a common and readily available loan modification application form, consideration for consumers not proficient in English, and protection from up-front fees.
"The modification program was put in place to provide alternatives to foreclosure," bureau director Richard Cordray said.
"Our principles will serve as helpful guardrails for servicers, investors, and regulators to consider as we continue to protect consumers who are struggling to pay their mortgages," Cordray said.
Cordray emphasized that the proposals don't establish binding legal requirements on mortgage servicers, who collect payments from the borrower and forward those payments to the investors, who own the loans that are packaged for the secondary mortgage market.
The bureau's proposals are designed to offer a meaningful payment reduction for borrowers and guarantee that repayment plans are affordable through the life of the loan.
In addition, consumers should easily be able to obtain and use information about loss-mitigation options and how to apply for those options, as well as get clear and concise information about the decisions servicers make.
The proposals are available at http://goo.gl/KPHfkq.