Real Estate News

More than 122,000 mortgage borrowers earlier this year have had their trial loan modification canceled. This group brings the total of canceled trial loan modifications to 277,640 since theinception of HAMP started nearly a year ago .

Under the program, known as HAMP, eligible troubled borrowers are put into a trial loan modification to determine whether they can keep up with the lowered payments and to give loan servicers time to verify income and hardship.

Homeowners who had trouble keeping up their mortgages found that they had their home loan modification canceled because they failed to make their lower mortgage payments or handed over false information regarding their income.

New HAMP Rules For Income Verification

If you want to prevent having your trial loan modification canceled you need to follow the new government loan modification rules that went into effect June 1, 2010, to prove you have qualifying income .

Here’s what the new HAMP rules stipulate before you get approved for a trial loan modification :

• Employment income : Copies of two recent pay stubs, not more than 90 days old at time of submission, indicating year-to-date earnings.

• Income from your own business : Most recent quarterly or YTD profit and loss statement for each self-employed borrower.

• Other earned income: Proof of bonus, commission, fee, housing allowance, tips or overtime. You’ll need reliable third-party documentation .

• Income from various benefits : Includes social security, disability, death benefits, pension, public assistance, adoption assistance. You’ll need evidence of the amount and frequency and receipts showing payments or deposits.

• Benefits from unemployment : Your benefits must continue for at least nine months from the date of the application.

• Rental property income: You’ll need to provide Schedule E for the most recent tax year. If you’re renting out part of your primary residence, only 75 percent of what you collect will be counted. If you’re using rental income from other real estate investment property , HAMP will do the following calculation: 75 percent of the monthly gross income minus your monthly debt service (principal, interest, taxes, insurance, and association fees).

• Alimony, separation maintenance, and child support: You’re not required to use alimony, separation maintenance or child support income to qualify for Home Affordable Modifcation Program . But if you are going to use it, you’ll need to include supporting documentation, like your divorce decree, plus evidence of receipt of payment.

• Passive and non-wage income : Even if you have passive income (including rental, part-time employment, bonus/tip, investment and benefit income), it does not have to be documented under HAMP program if the borrower confirms that the total amount is less than 20 percent of the borrower’s total income.

• Non-borrower income: Loan servicing companies are instructed to include non-borrower household income, if it is voluntarily provided by the borrower and if it can support the mortgage. If you use non-borrower income (that is, income from someone else living in the home who is not on the mortgage), then it has to be verified as described above).

It is suggested that you review this list of income verification requirements and get all your documents collected and neatly organized. You want to make it as easy as possible for your loan servicer to review your documents quickly so you can get approved faster for the trial loan modification program.