Is the Home Affordable Modification Plan(HAMP) plan for you?

There was a great article written in the LA Times about the new changes to the HAMP or Home Affordable Modification Plan by the US Department of the Treasury and the US Department of Housing (HUD).

The changes, designed to help improve the conversion from trial loan modifications to permanent modifications, take effect June 1. Mortgage servicers may elect to implement the changes sooner.

Here are some of the important points to note:

• Under previous guidelines, homeowners were not required to document their incomes prior to

receiving a trial mortgage modification. The trial modifications typically lasted three months, during

which time the servicer was supposed to collect documents to verify the homeowner’s income. If the

borrower met the monthly obligations, and submitted the required paperwork, the modification was

supposed to be made permanent. However, many homeowners failed to provide the necessary

paperwork, or the loan servicer lost the paperwork, resulting in just 66,465 permanent modifications

out of the nearly 1.2 million trial modifications.

• The updated process requires that servicers collect three documents prior to granting a trial mortgage

modification: A formal application, including a description of the hardship created by the mortgage;

proof of income, such as two recent pay stubs or the most-recent profit and loss statement for selfemployed

borrowers; and a form authorizing the Internal Revenue Service to release tax data to the

servicer.

• If the borrower meets the modified payment requirements for three months, the modification

automatically will be made permanent. The Treasury Dept. also said it will allow servicers some

discretion in making loan modifications permanent only if minor paperwork is missing. This discretion

will help address a large backlog of incomplete modifications.

• Under the plan, servicers also will be required to respond within 10 days to an initial request for a

modification. Once documents are provided, the servicer will have one month to let borrowers know

whether they qualify for a trial modification.

• Servicers also must calculate whether the lender or current owner of the loan will benefit from a

mortgage modification, or if foreclosing on the property is in the loan owner’s best interest. If the loan

owner will benefit from a modification, the servicer is required to grant the modification. Requiring

borrowers to provide financial documents upfront will enable servicers to decide if a modification or

foreclosure is the best option.

To read the full story, please click here:

http://www.latimes.com/business/la-fi-mortgages-income29-2010jan29,0,3075748.story