What’s the latest updates for the government loan modification plan? The guidelines for 2012 have not changed a lot, but some new revisions to how lenders implement the program and get reimbursed from the Treasury department are expected to result in more completed loan mods for borrowers. Almost 1 million homeowners have been helped, but this figure falls short of the stated goal of assisting 4 million struggling borrowers. In fact, with just 1 in 4 applications being approved, something needs to drastically change before the program expires at the end of 2012.
The latest 2012 updates include:
- More incentives for Principal Reductions; one of the major issues facing the housing market is the $750 billion in lost equity-and most experts acknowledge that lenders need to aggressively modify loans to include reducing the principal balance so that homeowner can get closer to being equitable. Now, increases the incentive to lenders for offering this loan modification option-63 cents on the dollar will be reimbursed to banks for every dollar forgiven.
- Fannie and Freddie are also included in the new program guidelines, also as encouragement for banks and servicers to lower the loan balance on underwater borrowers.
- Homeowner qualifications remain the same as before, with the guidelines mandating that the income, expenses and assets pass the strict underwriting criteria set up. The RMA form is still used for applying, and the financial worksheet must be completed showing an acceptable monthly budget for the
- Timeframes have been shortened, the Fed now states that banks must respond to a request for modification within just 30 days of receiving a complete application package.
- Single point of contact: now each file will be assigned to one negotiator, and the borrower will only have to interact with a single person during the review and underwriting process. Hopefully this will eliminate misinformation, lost paperwork and delays.
The 2012 guidelines are designed to reach more homeowners and find out if a loan modification is a possibility for their particular situation. If not, then other options will be offered to help the borrower avoid foreclosure, such as deed in lieu and short sale.
Bottom line, homeowners must prove that they fit perfectly into the approval guidelines in order to be offered a loan mod. Often the application paperwork is not completed correctly, and borrowers simply do not understand exactly what they need to report for their income, expenses and assets to qualify for a new lower mortgage payment. Remember, that if you can provide a properly completed RMA form, you could have your loan modification approved within just 30 days under the new updates-so take the time to do it right.
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