Feds Giving Mortgage Modifications Additional Boost

It's not easy turning a potential foreclosure into a successful affordable mortgage modification -- from either side of the table.

Homeowners, facing confusing documentation requirements and conflicting advice from both honest and dishonest corners, become intimidated and drag their heels or bury their heads.

Lenders, grappling with voluntary provisions in ever-evolving regulatory adjustments, skilled worker shortages and disoriented homeowners, not surprisingly develop an edge of ambivalence.

To help clear some of the sludge out of the Obama Administration's Home Affordable Modification Program (HAMP) the U.S. Treasury Department and Department of Housing and Urban Development (HUD) recently announced plans to speed up trial mortgage modification conversions to help homeowners obtain a permanent mortgage modification.

A more recent addition to the plan also calls for ban on mortgage lenders canceling trial modifications that are due to expire before Jan. 31, 2010, giving homeowners more time to convert.

A mortgage modification occurs when the lender reworks the terms of your existing home loan, typically to lower payments and make the home more affordable for you. Lower payments can result from a lower interest rate, extended loan term, reduced principal or any combination of those approaches.

Under the HAMP plan, borrowers who sign up for mortgage modifications begin with a trial modification of up to five months. That gives them time to submit a stack of paperwork, including proof of income, assets, debts, hardship affidavit and other documents, to make the modification stick. The trial period also gives them time to determine if the modified monthly payment is sustainable.

Approximately 60 percent of the 375,000 borrowers who have begun trial modifications are scheduled to convert to permanent modifications by the end of the year, but have not completed the paperwork, according to the Feds.

The mortgage modification conversion effort includes provisions that have already:

• Extended the period for trial modifications started on or before September 1, 2009 to give homeowners more time to submit the required information.

• Streamlined the application process to minimize paperwork and simplify the submission process.

• Ordered federal officials to meet regularly with servicers (banks and lenders) to identify necessary improvements to borrower outreach. Servicers failing to meet certain obligations could be subject to monetary penalties and sanctions.

• Developed operational metrics to hold servicers accountable for their performance, which will soon be reported publicly.

• Enhanced borrower resources on the MakingHomeAffordable.gov website and the Homeowner's HOPE Hotline (888-995-HOPE) to provide direct access to mortgage modification tools and housing counselors.

New resources on MakingHomeAffordable.gov include:

• Links to all of the required documents and an income verification checklist to help borrowers request a modification in four easy steps.

• Information about how the trial phase works, what borrower responsibilities are to convert to a permanent modification, and new instructional videos which provide step-by-step instructions.

Watch more MakingHomeAffordable.gov YouTube videos.

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