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HAMP Modifications Will Require Income Documentation Upfront

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The not-so-hot Home Affordable Modification Program (HAMP) will soon require borrowers to provide important income documentation upfront in order to take part.

For all HAMP trial period plans with effective dates on or after June 1, loan servicers may evaluate borrowers for program eligibility only after they receive the initial documentation package, which includes:

– Request for Modification and Affidavit (RMA) form
– IRS Form 4506-T or 4506-EZ and
– Evidence of Income

The RMA form provides the servicer with borrower/co-borrower financial information and cause of hardship.

The IRS 4506-T/4506T-EZ forms are requests for transcripts of tax returns in case borrowers decide to fudge the numbers.

Evidence of income documentation will vary based upon employment type.

Within 10 business days of receiving the initial package, the servicer must acknowledge in writing the borrower’s request for HAMP participation by sending confirmation it was received.

Within 30 calendar days, the servicer must review the documentation and determine if the package is either incomplete, eligible for a HAMP trial mod, or ineligible, whereby the borrower must be considered for alternative loss mitigation options.

In the past, borrowers were able to verbally state income to get into the program, but that has stalled many potential loan modifications in the trial period, as evidenced by the numbers thus far.

As of December 31, 2009, more than 902,000 borrowers had begun trial modifications, but just over 112,000 were approved for permanent modifications.

The median monthly mortgage payment savings has been more than $500 per month for individual homeowners under HAMP.

More than 100 servicers have signed up to participate in the program, covering more than 89 percent of mortgage debt outstanding in the United States.

*The changes outlined above apply to loans not owned or guaranteed by Fannie Mae or Freddie Mac.

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