An Outlook About Changes In The 2010 HAMP

Under the Obama administration certain changes was made in the Home Affordable Modification Program that was believe to make loan modification process faster. The changes will be effective on the 1st day of June 2010. The changes address the income verification of the borrower and set guidance to lending institutions about which documented proof of income should they consider.

As stated the changes were made to lessen the amount of paperwork involved with the applications and efficiently using all the possible resources to speed up the application process. These changes were also believe to answer the bureaucratic issues of both lenders and borrowers are criticizing.

One requirement of HAMP is that pre-screened borrowers are oblige to enroll in a trial modification period. During this period the ability of the borrower to make payments on their modified mortgage is being test. The borrower is required to make three timely payments so that he /she can be granted a permanent modification. Also within this period the borrower is required by the to submit necessary documents to the servicer. However, recent program changes made difference on how trial modification periods are handled. As with every new directive, the income verification documents should be submitted in advance before the borrower enters the trial modification. It also shows what income sources are considered to be eligible for the program.

Now, according to new regulations these are the data the borrower needs to present verification of income, such as pay stubs that covers two most recent pay periods, IRS form 4506-T and modification application including hardship letter and financial statement to the loan servicer before getting into the trial modification period.

Again, as per new directive, the lender should acknowledge the receipt of the documents presented within 10 business days in writing and provide the borrower an estimated timeline of processing the application. Then, a documentation review will be conducted within 30 calendar days of application and upon receiving the documents. If there are applicants who missed to submit some of the required documents the lender should notify this person within this time period. An Incomplete Information Notice informs the document required and also the outline of the deadline of resubmission. Once the application is complete and accurate, there would be a loan modification. Successful applicants will receive a Trial Plan Notice while declined applicants will also be notified too of application denial.

As determined by the newly-set program guidelines, loan servicers will not be obligated to forebear thirty percent of unpaid mortgage principal or any modified interest bearing amounts that are not related with the required loan-to-value ratios. A borrower might be ineligible under the guidelines of HAMP if it is impossible to reduce their mortgage payment to fit the requirements of loan modification program. But, if the lenders decided to bring the borrowers in line with the monthly payment, they may also decide to forebear the principal on a mortgage.