Are you in loan modification hell? You might want to think about reapplying for the HAMP program under the new rules that start today.
I blogged about some of the new loan modification rules yesterday. But the biggest change to the HAMP rules is that you're going to have to prove that you have sufficient income before you get approved for a temporary loan modification.
(Until today, almost anyone could get a temporary loan modification over the phone. You had to provide reams of documentation to allow the lender to verify your income before you could get a permanent loan modification.)
What qualifies as income? Here's what the new HAMP rules require according to Supplemental Directive 10-01:
- Employment income: Copies of two recent pay stubs, not more than 90 days old at time of submission, indicating year-to-date earnings.
- Self-employment income: Most recent quarterly or YTD profit and loss statement for each self-employed borrower.
- Other earned income: Proof of bonus, commission, fee, housing allowance, tips or overtime. You'll need reliable third-party documentation.
- Benefit income: Includes social security, disability, death benefits, pension, public assistance, adoption assistance. You'll need evidence of the amount and frequency and receipts showing payments or deposits.
- Unemployment Benefits: Your benefits must continue for at least nine months from the date of the application.
- Rental income: You'll need to provide Schedule E (which is where rental income and loss is generally documented) for the mots recent tax year. If you're renting out part of your primary residence, only 75 percent of what you collect will be counted (with the remaining 25 percent considered vacancy loss and maintenance). If you're using rental income from other properties, HAMP will do the following calculation: 75 percent of the monthly gross income minus your monthly debt service (principal, interest, taxes, insurance, and association fees).
- Alimony, separation maintenance, and child support: You're not required to use alimony, separation maintenance or child support income to qualify for HAMP. But if you are going to use it, you'll need to provide supporting documentation, like your divorce decree, plus evidence of receipt of payment..
- Twenty percent threshold for passive and non-wage income: Even if you have passive income (including rental, part-time employment, bonus/tip, investment and benefit income), it does not have to be documented under HAMP if the borrower stipulates that the total amount is less than 20 percent of the borrower's total income.
- Non-borrower income: Loan servicers are instructed to include non-borrower household income, if it is voluntarily provided by the borrower and if it can support the mortgage. If you use non-borrower income (that is, income from someone else living in the home who is not on the mortgage), then it has to be verified as described above).
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Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com.