The problems associated with collecting documents to complete a Making Home Affordable Modification Program (HAMP) workout aren’t typically a matter of borrower fraud, but rather the result of the type of jobs borrowers have and how they make income, according to an assistant general counsel at North Texas-based Saxon Mortgage Services. Speaking at a Texas Mortgage Bankers Association (TMBA) servicing conference, Jodi Blanton said homeowner fraud is not the principal reason for documentation shortfalls, and even with incomplete income documentation, a servicer can make an informed judgment as to whether a borrower to attempting to commit fraud. Borrowers who work jobs where they get paid in cash — waiters, babysitters, landscapers and the like — or borrowers who are receiving help from family members to pay their mortgage can’t produce the documentation to complete the modification. Despite the missing documentation, the customers continue to pay, Blanton said. Saxon’s servicing book is comprised primarily of subprime mortgages. Of those borrowers needing assistance that are eligible for HAMP, 12,000 to 13,000 are missing documentation borrowers, but 80% of those are making their new monthly payments. To make the most of this positive cash flow, Blanton said Saxon created a non-HAMP modification plan that mirrors the government program. Borrowers that can’t complete a HAMP modification but are making their trial modification payments are placed in the proprietary program. “We’ve held onto these customers for a long time and we made a decision that it’s better for the investor to have positive cash flow than to deny borrower out of program,” Blanton said. The only difference is that Saxon, parent company Morgan Stanley (MS), and the loan investor do not receive the Treasury Department cash incentive. “There was a lot of hoopla over the incentive and that’s why this has become so politically charged is the payments everyone is receving,” she said. “But the amount of money the industry has spent getting this program started; the incentives are not why we’re in this. We’re in this to stabilize communities. Nobody wins when you foreclose.” Despite Saxon’s best efforts, there are still difficulties in completing the HAMP modification process. Borrowers distrust their servicer, especially if previous collections attempts were contentious or led to litigation. Now, with HAMP borrowers are expected to trust their servicer. In attention, particularly for Saxon’s book of subprime mortgages, borrowers used to stating income for purchase and refinance mortgages are now required to produce full documentation. Another emerging difficulty is trying to help unemployed borrowers. New Treasury initiatives recently announced to help unemployed borrowers don’t go into effect until the fall, and Blanton said there are many borrowers who have been current on payments during the entire term of the loan, but due to a lay-off, can’t make their payments. There are many borrowers who lose their job, but usually get a new position in about six months. Once they resume working, they can continue to make their original loan payment, but they need help with the delinquent payments from when the borrower wasn’t working. “What we’re hoping is that at some point, the [Making Home Affordable] program will accommodate those borrowers,” Blanton said. Write to Austin Kilgore. Disclosure: the author holds no relevant investment positions.