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Waiver of home loan modification restart rule should help more homeowners

Waiver of home loan modification restart rule should help more homeowners

Restart rule details

Permanent HAMP Waiver for Elimination of the 25% Trial Period Restart Rule #20091203 Supplemental Directive 09-01 (issued April 6, 2009) required borrowers to be reevaluated for a HAMP trial period if their verified income (as evidenced by the borrower’s documentation) exceeded the initial income information used by the servicer to place the borrower in the trial period by more than 25%.

The borrower would be reevaluated based on the program eligibility and underwriting requirements and, if eligible, would have to restart the loan modification trial period.

Mike Rockwood has modified five of his own loans, including his personal residence and investment property. He has created a top-notch workbook to walk you through the steps of fighting to get the best terms on your loan modification.

Click here to get proven help with your home loan modification

What’s changed

With the issuance of this waiver, borrowers are no longer required to restart the trial period. The trial period payments would not be adjusted, but the permanent modification terms would be based on the borrower’s higher verified income.

In plain English

To be eligible for a HAMP modification, a borrower’s pre-modification front-end DTI must be greater than 31%. Since a borrower’s current mortgage payment is known by the servicer, the initial screening to get into a trial modification turns on what the borrower states as his current income.

During the trial period, the servicer collects the borrower’s financial information and verifies what the borrower has provided.

Prior to the rule change on December 16, 2009, if the borrower understated his income by more than 25%, the servicer was required to re-qualify the borrower for a HAMP modification taking that higher income into account and, if the borrower was still HAMP-eligible, the 3 month trial period was restarted. An understatement by 25% or less would not require a re-start of the trial period.

The new rule will no longer require that the trial period be restarted if the borrower understates income, regardless of amount. If the other conditions of HAMP are satisfied, the borrower can proceed to permanent status.

The monthly payments under the permanent loan modification will be adjusted to reflect the higher verified income, but the borrower does not have to make up for any “shortfall” in respect of the lower trial period payments that were made. The borrower’s HAMP eligibility (31% DTI) will still be tested based on the higher verified income.
Source: http://www.mortgagenewsdaily.com/12172009_hamp_waiver_granted.asp

Before completing and sending in a loan modification package, you may want to obtain some coaching to combat the stall tactics banks/servicers are using to cut to the front of the line of other applications and get approved faster

Click here to get proven help with your home loan modification

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