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ASF Releases Market Practice Letter on HAMP Payments on July 6, 2010



The ASF has released its Home Affordable Modification Program (“HAMP”) Payments Market Practice Letter, approved by the ASF Board of Directors.  The letter includes the treatment of certain investor payments under HAMP, the calculation of delinquency triggers and certain tax-related practices. 

 

Please click here for the letter.

 

When a securitized loan is modified under HAMP, investors in the related securitization trust may be entitled to certain incentive and subsidy payments (the “Investor Payments”).  The Treasury Department has not issued guidance on how these payments are to be applied within a securitization transaction and nearly all outstanding PSAs do not address this issue.  In November, ASF Staff began holding joint meetings of our Master Servicer and Trustee Subforums to facilitate discussions concerning potential standard market practices for their securities administration duties with respect to these payments and other issues relating to the Treasury Department’s HAMP Program.  As a result of these discussions and in consultation with other affected ASF committees and subforums, a set of market practices was developed for securities administrators in dealing with HAMP modifications. 

 

In particular, the letter addresses:

 

·        Investor Payments, which market participants agreed should be applied at the top of a securitization waterfall as interest;

·        Potential options for tax treatment of those Investor Payments;

·        Treatment of modifications in delinquency triggers in securitizations based on a servicer’s determination of whether a borrower is “current” or “delinquent” under the modified terms of the loan; and

·        Potentially developing a standardized set of data elements to provide in their monthly investor reporting for modifications.