Treasury relaxes paperwork requirements for loan mods

January 29, 2010 12:19PM

Borrowers participating in the Obama administration’s Home Affordable Modification Program will soon have a simpler route to mortgage loan modifications. Under new guidelines, borrowers seeking to lower their mortgage payments will be required to provide just three items to servicers: a form requesting the modification, authorization for the servicer to access tax information from the Internal Revenue Service and evidence of income, the Treasury announced yesterday. The HAMP program, launched one year ago, has been widely criticized for its low success rates in turning three-month trial modifications into permanent ones, and borrowers and servicers alike had pointed to complex documentation requirements as one of the major stumbling blocks. Roughly 900,000 borrowers had been given trial modifications by the close of 2009, but only 66,465 of those had been converted to permanent ones. Beginning June 1, servicers will also have to gather the documents prior to granting trial modifications in order to avoid beginning the process with borrowers who ultimately won’t be able to come up with the paperwork. [WSJ]