Documentation Collection Process and Releases Guidance to Expedite Permanent Loan Modifications
Homeowners seeking to ease their mortgage terms must now document their finances before a trial modification will be granted, the Obama administration says.
As part of the Administration’s ongoing housing market stabilization plan, the U.S. Department of the Treasury and the Department of Housing and Urban Development (HUD) released updated guidance for mortgage servicers participating in the Administration’s mortgage modification program.
This guidance refines the documentation requirements in order to expedite conversions of current trial modifications to permanent ones. Mortgage servicers must adopt the policy by June 1, 2010.
The new procedure would require three documents upfront: a formal application including a description of the hardship; proof of income with at least two pay stubs or profit and loss statement for self-employed borrowers; and a form authorizing the Internal Revenue Service to release tax data to the mortgage servicer.
Effective for all trial period plans with effective dates on or after June 1, 2010, a mortgage servicer may evaluate a borrower for Home Affordable Modification Program (HAMP) only after the servicer receives the following documents, subsequently referred to as the Initial Package.
The Initial Package includes: Request for Modification and Affidavit (RMA) Form, IRS Form 4506-T or 4506T-EZ, and Evidence of Income.
HAMP, launched last spring, was designed to provide billions of dollars in subsidies to encourage lenders to forestall foreclosures by reducing mortgage payments to 31% of the borrowers’ household income. The goal was to offer loan modifications to 3 million borrowers, of the 902,620 trial loan modifications offered since the program started last spring, only 112,521 have been made permanent.
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