One of President Obama’s biggest challenges in fixing the economy is finding a way to help stem the tide of preventable foreclosures that are currently dragging down the battered housing market.
Through the Making Homes Affordable program, home owners and lenders were to work together to find way to modify existing mortgages to make the loans more affordable , usually resulting in a lower interest rate, even for homes that are under water.
The program got off to a sluggish start, with swamped lenders being slow to roll out trial modification programs for eligible borrowers. Lately, many more trial modifications have been offered to borrowers, which shows that the program can in fact work.
However, many of the trial modifications have not been made into permanent changes. In many instances, this is because once a trial modification is put in place, the borrower is required to provide additional documentation in support of the new payment.
The documents required to be submitted by the borrower – proof of income, bank statements, tax documents, etc. – is sometimes never been received by the mortgage servicer, filled out incorrectly, or lost/misplaced by either the borrower or the lender. This causes the trial modification to not only not become a permanent change, but, in many instances, causes monthly payments to return to pre-trial modification levels.
In an attempt to help solve the problem, the Treasury Department announced that borrowers who wish to enter into a trial modification must provide all required documentation UP FRONT.
Obviously, this will make getting a trial modification a little more difficult, but, will ultimately make getting a permanent modification a much more efficient and fool proof process.
And, if you think about it, this is exactly what should have been required from the beginning, especially when you consider that many of these problem loans were Alt-A, no documentation “liar loans.”
So, let’s hope this latest initiative will be a step in the right direction in getting the economy back on track.
