The Home Affordable Modification program is meant to help homeowners who are having difficulty making their mortgage payments and are at risk of going into foreclosure. To qualify for assistance under the program home owners must be able to provide proof that they are facing hardship or that they are unable/struggling to make current mortgage payments. Their current monthly payment must also be more than 31% of their gross monthly income. The home that they are looking for assistance on must be their primary residence and the mortgage cannot be more than 125% of the home’s current market value.
The program was meant to help millions of homeowners and carries a price tag of 75 billion dollars. There have been a few snags, however, with homeowners being unable to get needed assistance. Lenders have been very slow to offer up the program to current mortgage holders. As of the end of 2009, Bank of America and other participating lenders had only served four to 20 percent of their mortgage holders who were eligible for loan modification, leaving many struggling homeowners in the lurch.
New guidelines would hopefully push the program along. Under the current programs lenders are able to drag their feet and not get documentation up front. When homeowners enter into the trial program there is also currently no guarantee that they will be able to move onto permanent modification.
New guidelines would require documentation up front including an application hardship letter, proof of income with a recent pay stub or profit/loss statement if self employed, and a 4506-T form which allows the lender to have data released from the IRS. Servicers of the loan must also now respond to requests within a ten day time frame. Finally, and most importantly, once homeowners have entered into the trial program and follow the program guidelines making three on-time payments, it should be a much quicker process to convert to a permanent modification. Lenders will not be able to sit on making a decision for an indefinite period of time before letting the lender know whether or not they have been approved for permanent modification.
HUD’s senior adviser for housing finance, William Apgar, is encouraged and commented on the changes. He believes that the updates should enable servicers to transition borrowers more quickly and easily from trial to permanent modification.