U.S. Treasury and Housing and Urban Development (HUD) officials today announced new paperwork guidelines to speed up permanent mortgage modifications for borrowers under the government’s beleaguered foreclosure rescue program.
The new rules require key documents – including proof of income – from homeowners before initiating a trial modification. The upfront requirement is meant to accelerate the process at end of trials – when borrowers are evaluated for permanent relief with the reduction of monthly payments by hundreds of dollars. Previously, the paperwork was required after trial start-up.
There is now increased pressure on mortgage servicers. They must provide the homeowners with a receipt as prove that the documents were received within 10 days. Then, the servicers must either approve or reject the borrower for a trial modification within 30 days.
Administrators referred to the required paperwork from borrowers as ”a simple, standard package of documents” needed to take part in the government’s $75 billion Home Affordable Modification Program, or HAMP.
“This process will be required for all new HAMP modifications that became effective after June 1, although mortgage servicers may implement it sooner,” said a joint statement issued by Treasury and HUD.
“Increasing the number of borrowers receiving permanent modifications under HAMP is critical to our efforts to preserve affordable and sustainable homeownership,” said HUD Senior Advisor for Housing Finance William Apgar.
HAMP has come under fire in recent months from oversight groups and mortgage industry experts for its delays in converting trial participants into permanent relief.
The latest Treasury update on HAMP through December reported 66,465 completed permanent modifications out of 902,000 trials initiated since the program’s inception in early 2009.
But it’s the program’s overall structure and what it lacks that has been the focus of criticism.
The State Foreclosure Prevention Working Group last week released a critical report on HAMP efforts. The group of 12 state attorneys general and three banking regulators said that despite the growing number of loans that are “underwater” – where the homeowner owes more than the property is worth – only a fraction of loan modifications involve reducing the unpaid balance by more than 10 percent.
Experts and economists agree that addressing negative equity is vital to easing the foreclosure crisis.
U.S. officials are hesitant in demanding more principal forbearance from lenders fearing strains on an already tight credit market and a significant number of regional banks saddled with bad loans.
The website for homeowners seeking more information is: http://makinghomeaffordable.gov/
[...] and HUD officials recently announced new paperwork guidelines to speed up permanent mortgage [...]