By: Anna Cuevas, Loan Mod Guru
As of June 1, 2010 the ONLY way you will be considered for a HAMP Home Affordable Modification Program will be by specifically sending in an “Initial Package” and thus requesting consideration for the HAMP Modification. Prior to the new directive which came out in January 2010 they could offer the trial prior to receiving your income and application but after June 1, 2010 all of this will change and you MUST submit the following forms to even be considered and evaluated for HAMP. I think it is a good idea to put your request on this form anyway as this way there is no mistaking that you are applying for HAMP as your first option.
Request for Modification and Affidavit (RMA) Form, IRS Form 4506-T or 4506T-EZ, and Evidence of Income
Make sure to go to: Calculate Your Income Like HAMP Does
See Excepts from HAMP Home Affordable Modification Program Guidelines in regards to the June 1, 2010 below:
Request for Modification and Affidavit (RMA) Form – is the HAMP application form attached herewith
The RMA Form provides the servicer with borrower and co-borrower financial information including the cause of the borrower’s hardship. The financial information and hardship sectionsof the RMA must be completed and executed by the borrower and, if applicable, the co- borrower. The RMA also solicits data related to the race, ethnicity and gender of the borrower and co-borrower, referred to as Government Monitoring Data (GMD). The borrower and co- borrower are not required to provide GMD. Servicers may not refuse to accept an RMA because the borrower or co-borrower did not complete this section.
Servicers may require use of the RMA by all borrowers requesting consideration for HAMP or may continue to use other proprietary financial information forms that are substantially similar in content to the RMA. When provided by or on behalf of the borrower, the RMA form must be accepted by servicers in lieu of any servicer specific form(s). When the RMA is not used, servicers must obtain an executed MHA Hardship Affidavit, a standalone version of which is available on www.HMPadmin.com. Servicers may also incorporate all of the information on this standalone affidavit into their own form.
IRS Form 4506-T/4506T-EZ
All borrowers must provide a signed and completed IRS 4506-T/4506T-EZ (Request for Transcript of Tax Return).1 While either form is acceptable, use of Form 4506T-EZ is encouraged because of its relative simplicity. The borrower must print, sign and send the form to his or her servicer.
Evidence of Income
The Initial Package must also include the borrower’s income verification documentation described in the “Borrower Income/Asset Documentation and Verification of Eligibility” section of this Supplemental Directive. The income evidence and financial information provided by the borrower may not be more than 90 days old as of the date the Initial Package is received by the servicer.
Acknowledgment and Review of Initial Package
Within 10 business days following receipt of an Initial Package, the servicer must acknowledge in writing the borrower’s request for HAMP participation by sending the borrower confirmation that the Initial Package was received, and a description of the servicer’s evaluation process and timeline. If the Initial Package is received from the borrower via e-mail, the servicer may e-mail the acknowledgment. Servicers must maintain evidence of the date of receipt of the borrower’s Initial Package in its records.
1 IRS Form 4506T-EZ may not be applicable to borrowers that do not file federal income tax returns on a calendar year basis, borrowers that do not file federal income tax returns using Form 1040 and borrowers that have not filed a federal income tax return. Servicers should obtain a signed and completed IRS Form 4506-T from these borrowers.
The servicer must review the documentation provided by the borrower for completeness within 30 calendar days from the date an Initial Package is received,. If the documentation is incomplete, the servicer must send the borrower an Incomplete Information Notice in accordance with the guidance set forth in the “Incomplete Information Notice” section below. If the borrower’s documentation is complete, the servicer must either:
Send the borrower a Trial Period Plan Notice; or
Make a determination that the borrower is not eligible for HAMP and communicate this determination to the borrower
A single written communication sent within 10 days of receipt of a borrower’s request for HAMP participation may also include, at the servicer’s discretion, the results of its review of the Initial Package. Servicers are reminded that Supplemental Directive 09-01 generally prohibits servicers from proceeding with a foreclosure sale for any potentially eligible mortgage loan until the borrower has been evaluated for eligibility under HAMP and has been determined to be ineligible or has declined a trial period plan offer.
Incomplete Information Notice
If the servicer receives an incomplete Initial Package or needs additional documentation to verify the borrower’s eligibility and income, the servicer must send the borrower an Incomplete Information Notice that lists the additional required verification documentation. The Incomplete Information Notice must include a specific date by which the documentation must be received, which must be no less than 30 calendar days from the date of the notice. If the documents are not received by the date specified in the notice, the servicer must make one additional attempt to contact the borrower in writing regarding the incomplete documents. This additional notice must include the specific date by which the documentation must be received, which must be no less than 15 calendar days from the date of the second notice. If a borrower is unresponsive to these requests for documentation the servicer may discontinue document collection efforts and determine the borrower to be ineligible for HAMP. If the borrower is determined to be ineligible for HAMP, the servicer must communicate this determination to the borrower.
Trial Period Plan Approval
Within 30 calendar days following receipt of an Initial Package or complete verification documents, the servicer must complete its verification and evaluate the borrower’s eligibility for HAMP and, if the borrower is qualified, send the borrower a Trial Period Plan Notice. If the borrower is determined to be ineligible for HAMP, the servicer must communicate this determination to the borrower in accordance with the Borrower Notice. Servicers are reminded that Supplemental Directive 09-01 prohibits servicers from initiating a NEWforeclosure action while a borrower is in a trial period plan.
Consideration for Alternative Loss Mitigation Options
When a borrower is determined to be ineligible for a HAMP modification, the servicer is required to consider that borrower for all other available loss mitigation options, including but not limited to refinance, forbearance, non-HAMP modifications and, to the extent a borrower does not qualify for a home retention alternative, Home Affordable Foreclosure Alternatives (short sales or deeds in lieu of foreclosure). As required available loss mitigation options should be described in the Non- Approval Notice.
Continued Eligibility for HAMP
A borrower who has been evaluated for HAMP but does not meet the minimum eligibility criteria described in the “HAMP Eligibility” section of Supplemental Directive 09-01 or who meets the minimum eligibility criteria but is not qualified for HAMP by virtue of a negative NPV result, excessive forbearance or other financial reason, may request reconsideration for HAMP at a future time if they experience a change in circumstance**** see
Borrower Income/Asset Documentation and Verification of Eligibility
Servicers should request that the borrower provide the income verification documentation listed below but may, consistent with contractual requirements, substitute other reliable forms of verification when appropriate. Servicers are responsible for determining that any information provided by the borrower and which is needed to evaluate the borrower’s qualification for HAMP is complete and accurate. When evaluating a borrower’s eligibility for HAMP, servicers should use good business judgment consistent with the judgment employed when modifying mortgage loans held in their own portfolio.
Employment Income. Copies of two recent pay stubs, not more than 90 days old at time of submission, indicating year-to-date earnings.
a. Servicers may accept pay stubs that are not consecutive if, in the business judgment of the servicer, it is evident that the borrower’s income has been accurately established.
b. When two pay stubs indicate different periodic income, servicers may use year-to- date earnings to determine the average periodic income, and account for any non- periodic income reflected in either of the pay stubs.
c. When verifying annualized income based on the year-to-date earnings reflected on pay stubs, servicers may, in their business judgment, make adjustments when it is likely that sources of additional income (bonus, commissions, etc.) are not likely to continue.
Self-employment Income. The most recent quarterly or year-to-date profit and loss statement for each self-employed borrower. Audited financial statements are not required.
Other earned income (e.g., bonus, commission, fee, housing allowance, tips, overtime). Reliable third party documentation describing the nature of the income (e.g. an employment contract or printouts documenting tip income).
Benefit Income (e.g., social security, disability, death benefits, pension, public assistance, adoption assistance). Evidence of (i) the amount and frequency of the benefits such as letters, exhibits, a disability policy or benefits statement from the provider, and (ii) receipt of payment, such as copies of the two most recent bank statements or deposit advices showing deposit amounts. If a benefits statement is not available, servicers may rely only on receipt of payment evidence, if it is clear that the borrower’s entitlement is ongoing.
Unemployment Benefits. Evidence of the amount, frequency and duration of the benefits (usually obtained through a monetary determination letter). The unemployment income must continue for at least nine months from the date of the application. The duration of benefit eligibility – including federal and state extensions – may be evidenced by a screenshot or printout from the Department of Labor UI
Rental income. Rental income is generally documented through the Schedule E – Supplemental Income and Loss, for the most recent tax year.
a. When Schedule E is not available to document rental income because the property was not previously rented, servicers may accept a current lease agreement and bank statements or cancelled rent checks.
b. If the borrower is using income from the rental of a portion of the borrower’s principal residence, the income may be calculated at 75 percent of the monthly gross rental income, with the remaining 25 percent considered vacancy loss and maintenance expense.
c. If the borrower is using rental income from properties other than the borrower’s principal residence, the income to be calculated for HAMP purposes should be 75 percent of the monthly gross rental income, reduced by the monthly debt service on the property (i.e., principal, interest, taxes, insurance, including mortgage insurance, and association fees), if applicable.
Alimony, Separation Maintenance, and Child Support Income.Borrowers are not required to use alimony, separation maintenance or child support income to qualify for HAMP. However, if the borrower chooses to provide this income, it should be documented with (i) copies of the divorce decree, separation agreement or other legal written agreement filed with a court, or a court decree that provides for the payment of alimony or child support and states the amount of the award and the period of time over
which it will be received, and (ii) evidence of receipt of payment, such as copies of the two most recent bank statements or deposit advices showing deposit amounts. If the borrower voluntarily provides such income, and that income renders the borrower ineligible for a HAMP offer, the servicer is allowed to remove that income from consideration and re-evaluate the borrower for HAMP eligibility.
20% Threshold for Passive and Non-Wage Income. Notwithstanding the foregoing, passive and non-wage income (including rental, part-time employment, bonus/tip, investment and benefit income) does not have to be documented if the borrower declares such income and it constitutes less than 20% of the borrower’s total income.
Non-Borrower Income. Servicers should include non-borrower household income in monthly gross income if it is voluntarily provided by the borrower and if, in the servicer’s business judgment, that the income reasonably can continue to be relied upon to support the mortgage payment. Non-borrower household income included in the monthly gross income must be documented and verified by the servicer using the same standards for verifying a borrower’s income.
If a borrower has indicated that there are association fees, but has not been able to provide written documentation to verify the fees, the servicer may rely on the information provided by the borrower if the servicer has made reasonable efforts to obtain the association fee information in writing.
Principal Forbearance Limitation
Effective as of the date of this Supplemental Directive, with respect to both “positive” and “negative” NPV results, servicers are not required to forbear more than the greater of (i) 30 percent of the unpaid principal balance of the mortgage loan (after any capitalization under Step 1 of the standard modification waterfall) or (ii) an amount resulting in a modified interest- bearing balance that would create a current mark-to-market loan-to-value ratio equal to 100 percent. If the borrower’s monthly mortgage payment cannot be reduced to the target monthly mortgage payment ratio of 31 percent unless the servicer forbears more than the amounts described above, the servicer may consider the borrower ineligible for a HAMP modification. However, servicers are permitted, in accordance with existing servicing agreements and investor guidelines, to forbear principal in excess of the amounts described above in order to achieve the target monthly mortgage payment ratio of 31 percent for both NPV-positive and NPV-negative loans.
In the event a servicer elects to forbear principal in an amount resulting in a modified interest- bearing balance that would create a current mark-to-market loan-to-value ratio less than 100 percent in negative NPV situations, the servicer should ignore the error code and the flag for excessive forbearance that is returned by the current version of the NPV model. Updates will be made to the NPV model in the future to eliminate this error code.
IRS Form 4506-T/4506T-EZ
All borrowers must provide a signed and completed IRS Form 4506-T/4506T-EZ (Request for Transcript of Tax Return) with the Initial Package, and the servicer must submit the borrower’s Form 4506-T/4506T-EZ to the IRS for processing unless the borrower provides a signed copy of his or her most recent federal income tax return, including all schedules and forms. Servicers should review the tax information and use good business judgment to determine whether any discrepancies exist. If the servicer determines that discrepancies relevant to the HAMP decision exist, the servicer must reasonably reconcile the discrepancies.
Credit Report and Occupancy Verification
For all borrowers, the servicer must obtain a credit report for each borrower or a joint report for a married couple who are co-borrowers to validate installment debt and other liens . Servicers should use the credit report to confirm that the property securing the mortgage loan is the borrower’s principal residence. If the credit report is inconsistent with other information provided by the borrower, the servicer must use good business judgment in reconciling the inconsistency.
Property Valuation Documentation
Servicers must obtain a property valuation input for the NPV model using an automated valuation model (AVM), provided that the AVM renders a reliable confidence score, a broker’s price opinion (BPO), or an appraisal. A servicer may use an AVM provided by one of the GSEs. As an alternative, servicers may rely on their internal AVM provided:
The servicer is subject to supervision by a Federal regulatory agency; The servicer’s primary Federal regulatory agency has reviewed the model; and The AVM renders a reliable confidence score.
If a GSE AVM is unable to render a value with a reliable confidence score, or the servicer AVM does not meet the requirements above, the servicer must obtain an assessment of the property value utilizing a BPO, an appraisal or a property valuation method documented as acceptable to the servicer’s Federal regulatory supervisor. Such assessment must be rendered in accordance with the Interagency Appraisal and Evaluation Guidelines (as if such guidelines apply to loan modifications). In all cases, the property valuation used cannot be more than 90 days old as of the date the servicer first evaluates the borrower for a HAMP trial period plan using the NPV model.
This is the Checklist for the items you need to submit for HAMP:
PROOF OF INCOME CHECKLIST
Your mortgage servicer needs the documents listed below to verify the income of each borrower. You can find the correct mailing address or fax number to submit your documents on the Contact Your Mortgage Servicer page.
For each borrower who receives a salary or hourly wages:
Copy of your two most recent pay stubs that show year-to-date earnings.
For each borrower who is self-employed:
Most recent quarterly or year-to-date profit/loss statement.
For each borrower who has income such as social security, disability or death benefits, pension, adoption assistance, public assistance, or unemployment:
Copy of benefits statement or letter from the provider that states the amount, frequency and duration of the benefit, or
Two most recent bank statements showing receipt of such payment.
For each borrower who is relying on alimony or child support as qualifying income*:
Copy of divorce or other court decree; or separation agreement or other written agreement filed with the court that states the amount and period of time over which it will be received, or
Two most recent bank statement showing receipt of such payment.
* You are not required to disclose Child Support, Alimony or Separation Maintenance income, unless you choose to have it considered by your servicer.
For borrowers who are current on their mortgage payments:
Copies of the most recently filed and signed federal tax return with all schedules, including Schedule E—Supplemental Income and Loss.
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