Facing mounting criticism about the effectiveness of the government’s foreclosure prevention efforts, the Obama administration announced Thursday that it will tighten the documentation requirements for borrowers applying for its marquee mortgage relief program.
Starting June 1, borrowers must prove they qualify for the mortgage help upfront, providing two pay stubs and other paperwork, before their payments can be lowered.
The change attempts to prevent a repeat of the current backlog of borrowers who received mortgage relief after a phone conversation with their lender but didn’t satisfy the government’s documentation requirements within three months.
More than 300,000 borrowers were at risk of losing their aid under the Making Home Affordable program by the end of January because they had not submitted required paperwork. But lenders were given new flexibility Thursday to make these loan modifications permanent despite the lack of documentation, Treasury officials said.