Greater Financial Transparency Under New Loan Modification Program
According to the latest information from the Obama Adminstration, Those seeking to ease their mortgage terms must now document their finances before a trial modification will be granted. The deadline for those institutions servicing loans under the program, the deadline for adopting the policy is June 1.
As noted in a recent article in the Los Angeles Times:
Taking borrowers at their word for how much they earn was a major cause of the mortgage meltdown. That practice may also be why an Obama administration program has struggled to convert temporary loan modifications into permanent ones.
The government said Thursday that it would overhaul the program by requiring homeowners to document their incomes before trial modifications are granted. Borrowers previously could have their interest rates lowered and the terms of their loans extended on a trial basis without providing pay stubs or other financial documents.
The loan service providers will now demand three primary documents for any loan modifications to proceed. They will ask for:
- A formal application including a description of the hardship created by the mortgage.
- Proof of income, which would mean at least two pay stubs or the most recent profit and loss statement for self-employed borrowers.
- A form authorizing the Internal Revenue Service to release tax data to the servicer.
Under the newly modified plan, if a borrower makes three payments at the modified rate, the modification will automatically be made permanent.
This can only be one more positive turn in the real estate market – especially here on the Westside of Los Angeles.