As of June 1, 2010, the way that homeowners facing foreclosure apply to the HAMP (Making Home Affordable) program will change.
Borrowers previously could have their interest rates lowered and the terms of their loans extended on a trial basis without providing pay stubs and other financial documents. Banks and other mortgage customer-service providers were supposed to collect that information during a three-month trial period, with the modification becoming permanent if the borrower made three lowered payments and submitted the required paperwork...
Of course we know that never happened. Many borrowers never even got the chance to participate in the trial modification process. Despite their pending foreclosure, their HAMP paperwork was often lost and/or they found it difficult to receive a timely decision from lenders. Many of those homeowners left waiting ended up waiting too long and lost their home to foreclosure. However, the Obama administration is implementing new changes to the rules of the HAMP program that many hope will improve homeowners chances of receiving a modification under the foreclosure prevention program.
The new procedure, to be adopted by loan servicers by June 1, would provide troubled borrowers with what the Treasury Department said would be a "simple, standard package of documents" to complete so that servicers could calculate whether they would qualify for a loan modification. With that determination made in advance, any borrower who made three payments at the modified rate would automatically have the modification made permanent.
This sounds like it could be a step in the right direction, however, we need to institute penalties for mortgage lenders who have high foreclosure rates and a low numbers of homeowners in the HAMP program. As was apparent by lender behavior in 2009, many mortgage servicers are not interested in the HAMP program. But mortgage modifications that make a loan permanently affordable are beneficial to stopping this foreclosure crisis.