Mortgage modifications get additional boost

It's not easy -- from either side of the table -- turning a potential foreclosure into a successful affordable mortgage modification.

Homeowners, facing confusing documentation requirements and conflicting advice from both honest and dishonest corners, become intimidated and drag their heels or bury their heads.

Lenders grapple with voluntary provisions, ever-evolving regulations, skilled worker shortages and disoriented homeowners. It's not surprising they develop some ambivalence.

To help clear some of the sludge out of the Obama Administration's Home Affordable Modification Program (HAMP) the U.S. Treasury Department and Department of Housing and Urban Development (HUD) recently announced plans to speed up trial mortgage modification conversions to help homeowners obtain a permanent mortgage modification.

A mortgage modification occurs when the lender reworks the terms of your existing home loan, typically to lower payments and make the home more affordable for you. Lower payments can result from a lower interest rate, extended loan term, reduced principal or any combination of those approaches.

Under the HAMP plan, borrowers who sign up for mortgage modifications begin with a trial modification of up to five months. That gives them time to submit a stack of paperwork, including proof of income, assets, debts, hardship affidavit and other documents, to make the modification stick. The trial period also gives them time to determine if the modified monthly payment is sustainable, according to the Treasury.

"Property owners we represent who are attempting to get mortgage modifications are frustrated by the amount of time it is taking to get the modification. Two owners have been at it since early June, with little progress," says Jan Leasure, managing broker of Monterey Bay Property Management in Monterey, CA.

Approximately 60 percent of the 375,000 borrowers who have begun trial modifications nationwide are scheduled to convert to permanent modifications by the end of the year, but have not completed the paperwork, according to the Feds.

On the other hand some delays are caused by servicers switch gears with each new federal update or adjustment to the program.

"The owners have also been frustrated by the fact that, as the programs offered by the federal government change, the lender changes the criteria for modification and the way their files are handled. Hopefully, the more options that are offered, the more property owners will be eligible for modification," Leasure said.

The mortgage modification conversion effort includes provisions that have already:

• Extended the period for trial modifications started on or before September 1, 2009 to give homeowners more time to submit the required information.

• Streamlined the application process to minimize paperwork and simplify the submission process.

• Ordered federal officials to meet regularly with servicers (banks and lenders) to identify necessary improvements to borrower outreach. Servicers failing to meet certain obligations could be subject to monetary penalties and sanctions.

• Developed operational metrics to hold servicers accountable for their performance, which will soon be reported publicly.

• Enhanced borrower resources on the MakingHomeAffordable.gov website and the Homeowner's HOPE Hotline (888-995-HOPE) to provide direct access to mortgage modification tools and housing counselors. New resources on MakingHomeAffordable.gov include:

• Links to all of the required documents and an income verification checklist to help borrowers request a modification in four easy steps.

• Information about how the trial phase works, what borrower responsibilities are to convert to a permanent modification, and new instructional videos which provide step-by-step instructions.