Update1: Changes to HAMP: Docs Required Upfrontby Tim Manni
Update1: These changes to the HAMP program (see ‘original post’ below) begin today. Servicers can now only review a mod application after a borrower has provided all the required paperwork.
According to Making Home Affordable, here is the new protocol:
Step One: Provide your servicer with the following “initial package” of documentation:
- Request for Modification and Affidavit (RMA) Form,
- IRS Form 4506-T or 4506T-EZ, and
- Evidence of Income
Step Two: Your service must respond to you within 10 days. “The servicer must acknowledge in writing the borrower’s request for HAMP participation by sending the borrower confirmation that the Initial Package was received, and a description of the servicer’s evaluation process and timeline.”
Step Three: “Within 30 calendar days from the date an Initial Package is received, the servicer must review the documentation provided by the borrower for completeness. If the documentation is incomplete, the servicer must send the borrower an Incomplete Information Notice in accordance with the guidance set forth in the ‘Incomplete Information Notice’ section below. If the borrower’s documentation is complete, the servicer must either”:
- Send the borrower a Trial Period Plan Notice; or
- Make a determination that the borrower is not eligible for HAMP and communicate this determination to the borrower in accordance with the Borrower Notice guidance provided in Supplemental Directive 09-08.
Click here if you wish to read the full details.
Original Post (published on 01/28/10): We can’t begin to tell you how many stories we have read from borrowers who say that they have waited months in limbo, unsure if their loan mod application has been or will be accepted into permanent status. Many borrowers have finished paying their three required trial payments, and still have not heard any news back from their lender.
Here’s the latest comment we received from our reader Troy who’s in that exact situation:
Wow I submitted my necessary paperwork to my lender on March 24, 2009 and still as of today haven’t got an answer as to whether or not I qualify. My trial period payments have been made and am paying my original loan amount until I hear back from my lender. I have heard not many are getting approved for various reasons.
As a way to improve upon this dilemma, the Treasury Department released updated guidance for servicers, that will enable them to “transition borrowers more quickly and easily from trial to permanent modification,” said HUD Senior Advisor for Housing Finance William Apgar.
Beginning on June 1, 2010, servicers can only review a mod application after a borrower has provided “an initial package that includes a request for modification and affidavit (RMA) form; the Internal Revenue Service (IRS) 4506T-EZ form, which gives servicers the ability to pull the borrower’s tax return; and two pay stubs from the borrower for proof of income,” according to HousingWire.com.
Ten days after receiving the package of documents (described above), the servicer must “acknowledge the request.” After that time, the servicer then has 30 days to inform the borrower whether or not their application for a trial mod has been granted or denied.
Too many borrowers like Troy have been automatically granted trial mods only to left hanging for months on end, unaware of whether they’ve been given a permanent mod or not, or what their monthly payment should be.
Supplemental Directive 10-01 provides guidance on two major issues:
1)New Requirements that Documentation be Provided Before Trial Modification Begins
Today’s guidance refines the documentation process and makes it easier for eligible borrowers in trial modifications to get permanent modifications quicklyUnder this guidance:
A simple, standard package of documents will be required prior to the servicer’s evaluation of the borrower for a trial modification. This process will be required for all new HAMP modifications that became effective after June 1, although mortgage servicers may implement it sooner.
2) Converting Borrowers in the Temporary Review Period to Permanent Modifications
In December, Treasury implemented a review period through January 31 to provide servicers additional time to collect and submit missing documentation for borrowers in trial modifications, to require that borrowers be notified of any missing documents, and to give borrowers an opportunity to dispute and correct any erroneous information in their applications.Today’s guidance clarifies for servicers the proper procedures for conversion of those borrowers who are current on their monthly payments to permanent modifications.
“This should improve the success rate for trial-to-permanent modifications, but will also simultaneously weed out ineligible borrowers at the start of the the process,” said HSH VP Keith Gumbinger. “However, it may ultimately increase deed-in-lieus, short sales, and foreclosures since ineligible borrowers won’t even get trial mods.”