Mortgage servicers using income verification in loan modifications see reduced foreclosure ratesMortgagePress.commortgage servicers, loan modifications, foreclosures, borrower verifications, Rapid Reporting, mari
Loan servicers are incorporating more borrower verifications,
such as those validating income and employment, into the evaluation
process when considering borrowers for loan modificationsthat's
according to Rapid Reporting, an award-winning innovator of income
and identity verification products to the mortgage industry. Until
recently, loan servicers have largely relied on information
compiled in loan origination when evaluating borrowers for loan
modifications. Verifying income and employment reflects the
servicing industrys move toward more thorough underwriting
standards as the industry struggles to correct itself amidst the
current foreclosure crisis.
"We've seen a significant increase in loan servicers that are
signing up for income verification for loan modifications, which
represents a big change as servicers had previously not been
involved with borrower qualifications," says Jay Meadows, chief
executive officer of Rapid Reporting. "This indicates that the
servicing industry is learning from industry problems and making
definitive changes to proactively ensure higher quality loans.
According to the Federal Bureau of Investigation, there is a strong
correlation between mortgage fraud and loans that result in default
or foreclosure, so it only makes sense to verify borrower
information on loans in delinquency to insure that the modified
terms fit the borrowers capacity to repay the loan."
These loan servicerswhich include some of the industry's most
prominent institutionsare now mandating that borrowers sign an IRS
form 4506-T, a consent form that allows the organization to request
a transcript of the borrower's tax return from the Internal Revenue
Service, before they will further consider the borrower for a loan
modification. Unlike in the past when mortgage companies often
secured consent forms but never used them, these mortgage servicers
are utilizing that authorization to acquire definitive answers on
the borrower's income, straight from the IRS, through the use of
income verification tools such as Rapid Reporting's IncomeChek.
"Without verifying the borrower's income, loan servicers can
never be certain that the payment terms of the loan modification
are realistic," says Meadows. "By securing definitive answers, loan
servicers gain the confidence that the loan modification is a
viable solution, rather than a futile attempt that will bring out a
bigger problem later down the road."
Despite the industry's tougher lending guidelines, mortgage
fraud is showing no signs of slowing down. According to the
Mortgage Asset Research Institute's (MARI) most recent quarterly
report issued in December 2008, incidents of mortgage fraud
increased by 45 percent in the second quarter of 2008, when
compared to the same period in 2007. This represents a 3 percent
increase over the previous quarter, which showed a 42 percent
increase over the same period in 2007.
"Across the board, organizations large and small, public and
private, are realizing that loans which verify income through IRS
tax transcripts are far less likely to result in foreclosurethat
includes new originations as well as loan modifications," says
Meadows. "The loan servicers that use income verification in their
loan modification programs have been recognized by regulatory
agencies for implementing sound practices that further mitigate
risk. Numerous industry sources report that loan modifications that
did not include verification of borrower income fail at a higher
rate and end up in foreclosure more frequently. Were very pleased
to be helping mortgage companies of all types in establishing a
system of quality in their practices."
For more information, visit www.RapidReporting.com.