Want a Loan Modification? The New HAMP Rules For Trial Loan Mods Start June 1

Last Updated Jun 21, 2010 8:11 AM EDT

UPDATE: Read about the requirements for income verification under the new HAMP rules. And, the Loan Modification Hell Horror Stories continue.

Are you looking for a loan modification?

If you're like the nearly 600 people who have left comments on my Loan Modification Hell: Join The Club post, you know that for many Americans, trial loan modifications are like a joke without the punch line.

Millions of Americans are in need of a loan modification, either because they've lost their jobs or had a forced paycut. And yet, just a tiny percentage of those who have been put into temporary loan modifications, has had their loan modification made permanent.

The Obama Administration continues to feed the line that more borrowers haven't been converted from temporary loan mods to permanent loan mods because they haven't provided all the necessary paperwork, or haven't been honest about what they really earned, or haven't made all of their payments on time.

Sure, some borrowers fall into that hole. But I'm guessing it's not the vast majority of borrowers who are in trouble.

Meanwhile, tomorrow the Obama Administration launches its new rules for HAMP loan modifications. The biggest change is that homeowners will have to prove their income before being put into a trial loan modification. Borrowers will have to provide:

  • Request for Modification and Affidavit (RMA) Form (which provides the loan servicer with borrower and co-borrower financial information including the cause of the borrower's hardship")
  • IRS Form 4506-T or 4506T-EZ (which gives lenders permission to pull electronic copies of the borrowers tax return)
  • Evidence of income (which could be two paystubs - I'll provide more information about what counts as income in tomorrow's post.)
Within 10 business days following receipt of an Initial Package (caps provided by the government), the loan servicer must acknowledge in writing the borrowers request for HAMP participation.

The loan servicer must review the Initial Package within 30 calendar days of receipt to make sure it is complete. If the documentation is incomplete, the servicer is supposed to immediately contact the borrower. But, if the package is complete, then the servicer must either send the borrower a Trial Period Plan Notice, or decide the borrower is not eligible.

Perhaps best of all, if you get put into a Trial Period Plan Notice, under the new rules, the loan servicer is prohibited from initiating a foreclosure action.

Is this plan going to help borrowers avoid foreclosure on a wide scale? Probably not. But if it helps even a few thousand, it's worth it.

What do you think?

If you apply for the program under the new rules and regs, please leave a comment letting us know what happened to you and whether you felt the new rules helped or hurt you.

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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.
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    Ilyce R. Glink is an award-winning, nationally-syndicated columnist, best-selling book author and founder of Best Money Moves, an employee benefit program that helps reduce financial stress. She also owns ThinkGlink.com, where readers can find real estate and personal finance resources.