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Improving Rules for Loan Modifications – Improving Results?

The government tries to keep lenders honest when evaluating homeowners for Loan Modifications.  Approvals of loan modifications are increasing.

Michigan, Mortgage, Expert, Birmingham, Bloomfield, Detroit, Rochester, Royal Oak, Troy

The Obama administration released its monthly press release about their report on loan modification efforts and found  a lot to brag about.

According to the Home Affordable Modification Program (HAMP) report, over a million homeowners were receiving a median savings $500/month.  176,000 homeowners had been granted a permanent loan modification and an additional 91,800 homeowners just had to accept their permanent offer.

The administration bragged they were on pace to meet Obama’s announced goal of helping 3-4 million homeowners.

A couple of highlights from the report:

  • 1.8 million homeowners are estimated to be eligible for loan modifications.
  • Under 16% of HAMP trial modifications have become permanent.
  • Of the permanent modifications approved, 100% have interest rate reductions, 40.8% had terms extended and 27.8% had partial principal forbearance. NOTE: no statistics on principal forgiveness!
  • The top 5 cooperating Servicers: GMAC Mortgage, CitiMortgage, Select Portfolio Servicing, Green Tree & Saxon Mortgage.
  • The worst 5 cooperating Servicers: Wachovia Mortgage, HomeEq Servicing, Carrington Mortgage Services, American Home Mortgage & CCO Mortgage.

Also making news is the government’s attempts to keep Servicers honest when dealing with homeowners hoping for loan modifications. 

The Home Affordable Foreclosure Alternatives (HAFA), a part of HAMP, tries to encourage Servicers to streamline the approval process for short Sales and Deeds-in- Lieu of foreclosure.

HAFA also includes some other interesting changes that should be noted by those looking for Michigan Loan Modifications (and in other states):

  • Participating lenders/servicers will be required to tell a homeowner in writing within 10 business days of their denial of a Michigan Loan Modification.  They must also inform homeowners why they were specifically denied and offer them short sale & deed-in-lieu alternatives.
  • If a homeowner discloses income from child support, alimony or separate maintenance that results in a loan modification denial, the servicer is allowed to ignore the income to qualify a homeowner for a loan modification.
  • Both a hardship letter and 4506-T or 4506-EZ are required for a loan modification approval.
  • If a homeowner doesn’t respond to an unsolicited trial modification offer, they are still eligible to request a loan modification at a later date.
  • If a homeowner’s first mortgage is modified under HAMP guidelines, and their second mortgage is serviced by a participating servicer, then that servicer MUST modify the homeowner’s second mortgage.
  • Second mortgages are modified by dropping the interest rate to 1% or by the lender accepting a lump sum payment from the U.S. Treasury for an amount equaling 4-12% of the balance of the loan.
  • Homeowners with seconds modified to a lower interest rate are eligible to receive $250 annually for up to 5 years, for making timely payments.

This information can be verified at the HAMP web portal for servicers, by clicking here.