The Treasury Department recently announced new
guidelines that will require applicants to provide all paperwork before getting
a trial modification. The new policy should make it easier for homeowners
to qualify for permanent assistance under President's Obama foreclosure
prevention plan, even though it makes it harder for them to start the process.
Borrowers have been complaining that their loan servicers constantly ask
for additional documents and lose their forms. Servicers, meanwhile, say that
borrowers are not handing in all that's needed. The new rules, which
start June 1, will shift the paperwork burden from the back end to the front
end of the process. Distressed borrowers will have to fill out a
three-page request form that asks them to explain their hardship and list their
income and expenses.
They will also have to sign an IRS 4506-T form
that allows servicers to pull their tax returns. Both forms are available on
the Making Home Affordable program's Web site. Applicants will also have
to verify their income. For those earning a salary, two recent pay stubs will
be sufficient. Other earnings, such as income from self-employment, benefits,
or rental properties, must still be documented. Servicers must
acknowledge receipt within 10 business days and, if the file is complete, let
the borrower know within 30 days if he or she is approved for the trial
modification. If the documentation is incomplete, the servicer must tell the
borrower what is outstanding. Those who are approved for trial adjustments
and make three timely payments will be automatically converted to long-term
modifications. Both servicers and housing experts applaud the move,
saying that borrowers will now have a better sense of their chances for
permanent help. "It will not lead to more modifications, but it will
lead to more certainty," said Howard Glaser, head of The Glaser Group, a
financial services analytics firm.
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