For SLAs that cover single-family loans, must the assuming bank honor the FDIC's loan modification program?
The FDIC requires that assuming banks modify loans using the Home Affordable Modification Program (HAMP) if they are approved HAMP servicers. If the assuming bank is not a HAMP approved servicer, it is required, as part of its SLA, to modify loans using the FDIC's standard modification program for failed bank single-family, owner-occupied loans. Both programs adjust the current loan terms to achieve an affordable payment by first reducing the loan interest rate, then extending the loan term, and, where necessary, offering forbearance of principal. The goal is to provide an affordable monthly payment based on a debt to income ratio for housing equivalent to 31 percent of the borrower's gross monthly income (including taxes and insurance payments).
The assuming bank can propose an alternative loan modification program that will achieve the goals of providing affordable payments consistent with cost effectiveness. If the FDIC concurs, then the bank can adopt the alternative program.