Loan Modification Offers Going Out Soon
Homeowners who have fallen behind on their mortgage payments have a new alternative to avoid foreclosure.
A new government initiative mandates that lenders offer loan modifications to people who are behind on their payments anywhere from three to 24 months. The goal is to help borrowers avoid foreclosure.
No Burdensome Documentation Required
According to an article in The New York Times, lenders will be offering these modifications without even being asked by homeowners. More importantly, it won’t carry burdensome documentation requirements, unlike a former loan modification program that fell short of expectations.
Borrowers won’t have to prove financial hardship to qualify but their loan must be insured by Fannie Mae or Freddie Mac.
The latest initiative, called the Streamlined Modification Initiative, will automatically be offered to borrowers who are at least three months behind and have had their loan for at least a year. To cut down on fraud, the loan must have a market-to-loan ratio of greater than 80 percent and not have had more than one previous loan modification.
Three-month Trial Period
“All it takes is for the borrower to make that new payment and they’re in the trial period of the program,” Timothy M. Dwyer told The New York Times. Dywer is the chief executive of Entitle Direct, a direct-to-consumer title insurance company.
“It can’t be any more simple than that. There’s not even a requirement that you sign something, send it in and have it approved.”
Borrowers have to make three monthly payments under a new payment schedule outlined in their offer letter. After three months, the payment schedule becomes permanent and the borrower signs a contract agreeing to the new terms. The borrower will be disqualified from the program f they fail to make a payment on time during those three months.
Program Scheduled to Start July 1
The program, offered under the auspices of the Federal Housing Finance Agency, was scheduled to start July 1, but The New York Times reported that some lenders had already begun sending out letters.
The goal is to reach out to delinquent borrowers earlier in the process, rather than waiting until they are in the foreclosure process.
In addition, borrowers can participate in the new modification program, even while applying for the Home Affordable Modification Program, the first modification program. In some instances, the Home Affordable Modification Program may offer a more affordable payment.
Photo credit: JefferyTurner