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Treasury Department Announces Tighter Deadlines and Documentation Rules for HAMP

January 29, 2010

As Fontana loan modification attorneys, we were interested in a recent announcement that the federal government is changing important rules for its foreclosure prevention program. According to a Jan. 28 article in MarketWatch, participants in the Home Affordable Modification Program will have to provide income-verification documents at the start of the process, beginning in June. In return, lenders will be required to acknowledge receipt of the documents within 10 days and make a yes or no decision within 30 days. The goal is to speed up the process of converting trial modifications into permanent ones.

HAMP has been under fire recently because of repeated reports that most loan modifications have not been made permanent. As the Chicago Tribune reported Jan. 28, the Treasury Department reports that only about 7.3% of HAMP loan modifications have been made permanent. Federal officials say the new rules will hasten the process by eliminating confusion and delay about income documentation. Previously, borrowers were required to provide the documentation during their three-month trial periods. Some had income changes that slowed the process or didn't submit the right documents, while others reported that lenders gave them contradictory requirements or lost their documentation. The up-front documentation rule mimics rules at two of the lenders with the highest conversion rates, GMAC Mortgage and Ocwen Financial Corp.

Our San Juan Capistrano loan modification lawyers wish the new program well, but we're afraid it won't increase conversion rates significantly. A large part of the problem with loan modification conversion lies with the lenders' inability or unwillingness to process applications quickly and explain requirements clearly. We believe lenders behave in these uncharacteristically incompetent ways because they don't truly want to offer loan modifications. The new rules try to stop bureaucratic delays by setting deadlines for responses, but these are easy to get around or ignore, if that suits the lender's needs. To get real action, banks need a clear showing that modifying loans is in their self-interest, through either market forces or government intervention.

At Howard Law PC, we're proud to say we've been able to help many homeowners strike deals with lenders to lower their mortgage payments in a meaningful way. That's true even when the homeowners themselves spent months fruitlessly trying to get a loan workout on their own. We believe our success stems at least in part from the fact that we are Orange County loan modification attorneys, which lets banks know that legal action is a real possibility. In fact, if we discover that your lender has violated your legal rights or is planning an unfair foreclosure very soon, we can and will file a lawsuit to stop it.

Howard Law offers free, confidential consultations, which means you're welcome to meet with us and learn about your legal options at no further obligation to you. To set up a consultation, please contact us through the Internet or call toll-free at 1-800-872-5925.