Aiming to provide practical guidance that creates a common framework for the structure and interpretation of loan modification, the American Securitization Forum (ASF) issued a statement of principles, recommendations and guidelines for the practice at its annual meeting in New York Wednesday.

The statement contains an illustrative list of modifications, including changing the interest rate on a prospective basis, forgiving principal, capitalizing arrearages, extending the maturity date, and note limitations that the ASF says are sometimes imposed on loan modifications and documents governing securitization. This includes documents governing securitization that promote greater uniformity, clarity, and certainty of applications and provisions through the industry.

Loan modifications for subprime mortgage loans are important servicing tools that can minimize losses to investors and help some borrowers avoid foreclosure, the ASF said, adding that it is important to minimize foreclosure and preserve homeownership. The statement puts a series of loan modification recommendations into action, which the trade association believes represent widely-accepted industry views based from its consultation with members and other securitization market participants.

The ASF's meeting wraps up today.

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