Another try at foreclosure rescue
Under fire for the low number of people receiving long-term mortgage help, the Treasury Department recently announced new guidelines that will require applicants to provide all paperwork before getting a trial modification. The new policy will make it harder for troubled homeowners to start the process, but it should make it easier for them to qualify for permanent assistance under President Obama’s foreclosure prevention plan. The administration’s $75 billion housing effort has been plagued by paperwork problems since it launched last April.
Borrowers complain 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 effectively shift the paperwork burden to the start 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.
Also, applicants will 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. As for the end of the year, some 66,500 people have received permanent adjustments, with another 787,200 homeowners in trial modifications.
Source: CNNMoney.com, Tami Luhby, (1/28/10)