The federal government, anxious to quicken the pace of home loan modifications, is set to roll out some new rules on loan modification applications — and you won’t be able to get a new home loan deal unless you abide by them.
The rules stem from the government’s Home Affordable Modification Program (HAMP), which has set home loan trial modifications in motion for about 900,000 Americans, according to government statistics. Of those Americans, 110,000 “graduated” from the three-month trial programs to permanent modifications by Dec. 31. The government says that the average loan modification customer saves $500 per month on his or her mortgage.
Those numbers aside, Uncle Sam thinks he can do better. Up to 4 million homeowner loans are deemed “troubled loans” by the government — and probably a lot more as the 700 million or so Americans who have lost their jobs during the Great Recession struggle to make their mortgage payments with no income. Fresh economic data shows that 10% of all U.S. homeowners are delinquent on their mortgage payments, with up to 13 million new foreclosures expected by 2015, a congressional study says.
The end game, according to a statement released on Jan. 28 by the Treasury and the Department of Housing and Urban Development (HUD), is to move more loan modification candidates from the trial phase to permanent adjusted-loan deals. That would open the pipeline for even more loan modification candidates, the Treasury estimates.
The federal government aims to do that faster by implementing some new changes. At the top of that list is a requirement for homeowners to provide key financial documents right from the start, including pay stubs and tax returns. Currently those documents aren’t required at the beginning of a loan modification deal. In many cases, all a homeowner had to do was declare his or her income to get the loan modification deal rolling. But, sooner or later, the bank would need the documents, and the unstructured process would often lead to delays and even rejections as paperwork was late, misfiled or undelivered.