What if the borrower defaults after the modification becomes permanent?
If, following a successful trial period, a borrower defaults on a modification under HAMP (three monthly payments are due and unpaid on the 90th day from the last paid installment date), the loan is no longer considered to be in “good standing”. A loan that is not in good standing is not eligible to receive borrower, servicer or investor incentives and reimbursements. Once lost, good standing can never be reinstated, even if the borrower brings the loan payments current. Good standing, however, only applies to incentive payments. The modification is not impacted and the borrower still has the benefits and responsibilities of the modified loan terms. The servicer must work with the borrower to attempt to reinstate the loan using all available loss mitigation options. If reinstatement is not feasible, the servicer must evaluate the borrower for any other alternatives prior to commencing foreclosure proceedings.
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