Requirements to Qualify and Get Approved for Principle Reduction Loan Modification DOJ Settlement. Short Sales May be a Great Viable Option if Borrower is Not Approved, According to ACL Real Estate

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Borrowers are better off knowing what the banks are using to determine if one can or can receive a DOJ principal reduction loan modification—before the process has begun. The settlement with Department of Justice along with 49 State's Attorney General's offers the most flexible terms to date and gives home owners a fighting chance to keep their homes. Short sales may be viable option if borrower is not approved.

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Short Sales --a good exit strategy

Principal will be forgiven in the amount necessary to achieve a DTI of 25 percent.

Requirements have finally been made available to the public on terms between the US Justice Department and Bank of America, Chase, Wells Fargo, Ally Financial (formally Gma) etc. It's important to check directly with your States Attorney Generals Office to determine what, if any, special requirements/ were included.

If one is unable to qualify for the principal reduction loan modification, a short sale may be a great viable option if borrower is not approved. East Bay (Oakland, Berkeley, San Leandro, Castro Valley, Hayward) urged to contact a local real estate agent for a professional opinion on listing your home for a short sale.

ACL Real Estate and Property Management Specializes in all things pertaining to distressed real estate and property management.

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Potentially Eligible Borrower. A Potentially Eligible Borrower is a borrower who meets the following criteria:

i. The borrower presently holds the mortgage and was the owner occupant of the residential property securing the mortgage at the time of origination.

ii. The borrower has not previously defaulted on a modification that afforded terms equal to or more favorable than those in the HAMP guidelines.

iii. The loan-to-value ratio (“LTV”) of the property securing the borrower’s mortgage exceeds 100 percent at the current market price of the property.

iv. The borrower is one whom "BOA" are not prohibited or prevented by law or by contract either from soliciting or from providing principal modification.

g. Required Documentation. Required Documentation shall consist of the following documents:

i. Credit Report.
ii. Salaried/Hourly Wages – Most recent pay stub.
iii. Self-Employed – Verbal financial information followed by completed P&L template certified by customer.

iv. Alimony and Child Support – Copy of legal agreement specifying amount to be received (customer shall certify twelve-month continuance if not included in legal agreement) and most recent bank statement, deposit slip or canceled check as evidence.

v. Other Taxable and Non-Taxable Benefits (Social Security /Disability / Pension / Public Assistance) – Award Letter OR most recent bank statement and, if non-taxable, also need 4506-T.

vi. Rental Income – Signed letter from customer detailing details of rental income and most recent bank statement, deposit slip or

A Settlement Loan Modification is a modification made according to the following priority:

i. All delinquent interest payments and late fees will be capitalized.

ii. Principal will be forgiven in the amount necessary to achieve a DTI of 25 percent, subject to the provision that the LTV need not be reduced below 100 percent.

iii. If, following the principal reduction step, DTI is above 31 percent, the interest rate will be reduced to the extent necessary to achieve a DTI of 31 percent, but in no event will the interest rate be reduced below two percent (beginning at year five, any reduced interest rate will be adjusted upward, so as to increase the net present value (“NPV”) of modifications). HAMP step rate requirements will be utilized, as summarized below:

1. Modified rate no lower than two percent is in effect for five years.

2. At the end of five years, the rate steps up at (up to) one percent per year, until the PMMS rate in effect at the time of the modification is reached (rounded to the nearest eighth).

For complete settlement, click here.

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ACL Real Estate and Property Management

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