Starting June 1st mortgage servicers offering mortgage modifications will be required to get borrowers’ financial documents upfront before they grant a trail modification.  Right now, borrowers facing foreclosure can receive temporary mortgage modifications based on the stated income they give the mortgage servicer over the phone.  The problem has been that while this will stall the foreclosure temporarily, once the true numbers are in, the servicers discover that the homeowner doesn’t qualify for the modification. The trial modification is ended and the foreclosure continues. The new rules aim to eliminate these foreclosures which take place after a trail modification by requiring official paperwork upfront.

Documents homeowners need to provide before they can get a trial mortgage modification:

  • Borrowers facing foreclosure will need to fill out a form describing why they need a mortgage modification and they will need to sign it.
  • Borrowers facing foreclosure will be required to fill out an IRS Form 4506-T or 4506T-EZ authorizing the mortgage servicer to get a transcript of their most recent federal income tax return.
  • Borrowers facing foreclosure will need to provide two of their most recent pay stubs which indicate their year-to-date earnings.
  • Self-employed borrowers facing foreclosure must provide their most recent quarterly or year-to-date profit and loss statement.
  • Other types of income such as tips, overtime, bonuses, commissions, fees, and housing allowances will need to be verified by a reliable third-party.
  • Borrowers facing foreclosure who are receiving other benefits such as social security, disability, alimony, child support or unemployment will need to provide official documentation proving that they have this source of income before they will be granted a trial modification.