Treasury to speed up Mortgage Loan Modifications
Home loan modifications to require more proof, new documentation requirement.
This year three million homes are projected to go into foreclosure.
In an effort to stop foreclosures, the Obama administration is making changes to its $75 billion mortgage loan modification program to speed up the conversion of troubled mortgage loans into more affordable permanent loans, the Treasury Department announced.
Homeowners seeking a trial loan modification through the Home Affordable Modification Program will have to submit to their mortgage servicer two pay stubs, an application form that includes a hardship letter and an electronic tax form, before the mortgage servicer evaluates the borrower’s eligibility for modification program.
A mortgage servicer is the company that homeowners pay their mortgage loan payments to.
HAMP has been a disappointment. The loan modification program had been plagued with a low success rate of trial loan modifications becoming permanent. Initially designed to help as many as 4 million borrowers obtain mortgage workouts, it had produced fewer than 70,000 permanent modifications as of December 31, 2009.
New document collection process would have borrowers submit paperwork for their loan modification ahead of any trial loan modification so that the loan would automatically be made permanent, if three trial payments are made on time.
Requiring the documentation upfront is a dramatic shift from the current practice of many mortgage servicers, which grant trial loan modifications on the basis of stated income levels that a borrower gives over the phone.
During the trial period, homeowners are expected to submit the required documents for review and approval to make the modification permanent.
Mortgage Servicer
A mortgage servicer is the company that borrowers pay their mortgage loan payments to. Mortgage servicers either purchase or retain mortgage servicing rights that allow them to collect payments from borrowers in return for a servicing fee.
The duty of a mortgage servicer includes the acceptance and recording of mortgage payments, payment of taxes and insurance from borrower escrow accounts, negotiations of workouts and mortgage modifications upon default.
A mortgage servicer may be a borrower’s lender. Nowadays, lenders might sell the mortgage to investors such as Fannie Mae, Freddie Mac, Ginnie Mae, and private investors in mortgage securitization transactions.
