Reduced Paperwork to Speed Up Loan Modifications

October 13, 2009 No Comments »

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Loan modifications, which have done little to stop the foreclosure train that continues to wreak havoc on the housing market and broader economy, may finally get easier.

The Treasury Department ‘s Office of Homeownership Protection policy director Laurie Maggiano said the government is going to introduce a new streamlined application process.

Apparently the new system requires just two documents to be signed, while the IRS’s behemoth computer system will process the applications and yield a “yes” or “no” answer within just two days.

Homeowners who are already in the three-month trial loan modification process will be given an extra two months to take part in the new system.

You have to admit it’s somewhat ironic that the government wants to reduce the amount of paperwork needed to solve the mortgage crisis, as the stated income loans played a huge role in getting us where we are.

To add insult to injury, Chase Home Loans senior VP Douglas Potolsky wants the Treasury to add an interest-only option to loan modifications for a certain period of time, like the first five years.

Treasury originally resisted because such mortgage payments don’t reduce the principal balance, a major issue considering how many borrowers are already deeply underwater.

Of course, such an option would just add to the eventual payment shock borrowers would feel when the loan modification adjusts, and does little more than repeat the mistakes that got us here in the first place.

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