Home Affordable Modification Program (HAMP) rolls out new guidelines

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.  

 For more information on the HAMP program visit. http://makinghomeaffordable.gov/