People Are Hoping To Avoid Foreclosure Through Loan Modification
This post series started a few days ago with a look at the “Making Home Affordable” program that the Obama administration passed earlier this year. In that post I gave an overview of the program, what it is designed to do, and who will qualify for help under the program. I looked at both the refinance program, as well as the loan modification program.
In Friday’s post I looked at the “Making Home Affordable Refinance” program, and talked about some of the questions people have about the program. Today I thought I’d round it out by doing a FAQ about the Making Home Affordable Loan Modification program. (If you have a second mortgage, don’t forget to check out this post)
Making Home Affordable Loan Modification FAQ
After reading through the government’s website, and a couple of other resources, here are some of the most common questions about the Loan modification program:
- Can Making Home Affordable help me if my loan is not owned or securitized by Fannie Mae or Freddie Mac? Yes. The Treasury has put together financial incentives for loan servicers to make it worth their while to modify homeowner’s loans to help save their homes. The government hopes to help 3 to 4 million homeowners avoid foreclosure.
- Do I need to be behind on my mortgage payments to be eligible for a Home Affordable Modification? No. Borrowers who are struggling to remain current may be eligible as well if they are at risk of default. For example, maybe their mortgage payment has recently increased because of a higher interest rate making the mortgage unaffordable. Maybe you’ve lost your job, or had a loss of income that means default is imminent. Contact your servicer, and be ready to document your situation and the reasons why you need a loan mod.
- I have a second mortgage. Am I still eligible? Yes, but your second mortgage is not. (UPDATE: Your second mortgage may now be eligible)
- How do I know if my servicer is participating? Are all servicers required to participate? The program is voluntary, so there are no guarantees. The Treasury is offering financial incentives, however, so it is in most lender’s best interest to consider modifying your loan.
- What will my servicer do to determine if I qualify? They’ll determine whether your particular loan is eligible, ask about current income, assets and expenses. Then they’ll determine if your loan is more than 31% of your pre-tax gross monthly income, and if it is, they’ll figure out what it would take to get it below that. They’ll then do some calculations to determine if doing a loan modification is worth it in your instance. If it is, you’ll be put on a 3 month trial modification, and at the end – if you’ve made all your payments/etc – you’ll have your loan modified permanently.
- Will the modified loan include property taxes and homeowners insurance? Yes. Even if your prior loan didn’t have this, your modified loan will require it.
- How low can my interest rate go? Treasury is providing incentives to your investor to write the interest down to as low as 2%, if necessary to get to a payment that you can afford based on your income.
- What happens if that is not enough to get to an affordable payment? If getting a 2% interest rate still isn’t enough to get to you to below 31% of pretax income, your loan term may be extended, part of the loan can be forgiven or part of the principal repayment could be delayed.
- What happens if I am unable to make payments during the trial period? You won’t be eligible any longer for the home loan modification, although you might be eligible for other foreclosure prevention programs.
- How much will a modification cost me? There should never be a home loan modification fee or late fees that you should have to pay to receive a home loan modification. Back taxes and other fees that must be paid can be added to the loan balance. You can pre-pay those if possible to save interest over the life of the loan.
- Can Making Home Affordable help me if my loan is not owned or securitized by Fannie Mae or Freddie Mac? Yes. Making Home Affordable offers help to borrowers who are struggling to keep their loans current or who are already behind on their mortgage payments. By providing mortgage servicers with financial incentives to modify existing first mortgages, the Treasury hopes to help as many as 3 to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage.
- I heard the government was providing a financial incentive to borrowers. Is that true? Borrowers who make their payments on time on their modified loans will receive “success incentives”. For every month you make a payment on time, Treasury will pay an incentive that reduces the principal balance on your loan. The incentive will be applied directly to your loan balance annually and over five years the total principal reduction could add up to $5,000.
- How do I apply for a modification under the Making Home Affordable Plan? Contact your loan servicer at the phone number on your mortgage bill, but only after gathering all your financial documentation that you’ll need to prove hardship.
If you would like to speak to a housing counselor you can call 1-888-995-HOPE (4673). HUD-approved housing counselors can help you evaluate your income and expenses and understand your options. This counseling is FREE.
Have you called about getting a loan modification? Are you considering it? Tell us about your experience in the comments.
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We had our loan modified by our lender. We had an ARM that went up to 10.5% last November. We started the paperwork for a rewrite in October, but were told that we had to wait for the ARM to adjust to really get the ball rolling. We were behind about 2 months at that time. It took 3+ months with a lot of paperwork, me following up weekly with our lender, and checking and double-checking the status. I was very resiliant with this. We couldn’t afford the new payment, and we had to show this. It wasn’t a hard thing to do but we had to keep at it and not give up.
Once we were within the last 30 days of the modification, I tried to call in a payment but was told not to because it would show we could pay, even though we were at that point 3 months behind, thus throwing us out of the modification program. Dumb rule, but you know we didn’t make that payment and then 3 weeks later our modification was done. We did save the payment we were going to send in because we were told there may be some fees to close the deal and there were (basically the total of one months payment).
In the end our mortgage is now a fixed 27 year note at 4.4%. Its very affordable and our payment dropped $480 a month from the original payment and dropped $890 a month from when our payment had adjusted up. We feel very fortunate to be able to stay in our home.
We didn’t have to go through HOPE but they told us if our lender gave us problems to contact them. We were fortunate that our lender worked very well with us, but like I said, it took 90 plus days and we did have to have some closing costs but we had it since we were putting money away to save up payments.
It can be done!
It seems that – with some lenders at least – they are going to have to be pushed to be kept honest. Perhaps it’s just confusion, while plans get put into place.
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Pete,
I tried calling HSBC asking for one, not because I was in trouble but why the heck should I pay 5.875% when they’ll let me pay 4% lol.
Quickly DENIED.
Told me that since I didn’t have an ARM loan I wasn’t getting the cheaper, easier modification but they’d be happy to discuss a Refi.
Disclaimer: this was wayyy back in Nov. so maybe its diff now.
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I called Countrywide a couple of months ago to inquire about a loan modification. After giving my financial statement and hardship due to loss of income, I was told “just let the house go into foreclosure, we can’t help you”!! I was extremely disappointed to say the least, and incredibly taken aback with their lack of compassion. My attorney also tried on my behalf and was told they could not help me as I am still current! This is insane and totally unacceptable. I am so sorry I have given them 3 years of our hard-earned money and would have loved to refinance with a different lender but we have lost about 80-100K in value and can’t refinance. I have yet to find out if Countrywide will be participating in the “Making Home Affordable” program. I have submitted a “call me” request form several times on their website, but still nothing. What now??
In response to Chris Hams,
I also have a mortgage with Countrywide and we have suffered a loss of income from when we originally purchased the home and I’m now drawing disability. We have been living on our savings for quite some time and are still current on our payments but the well is just about dry and we are more than likely going to be forced to try and negotiate a short sale or let the house slip into foreclosure if Countrywide doesn’t want to play ball with us.
At any rate, I contacted Countrywide asking what options might be available to us because moving will be extremely difficult with my injury. It took a lot of phone calls over a series of several weeks but I finally did get some information out of them. The loan agent I spoke claimed he had just gotten out of their HASP meeting and had information so that he could begin qualifying us for a streamlined refinance.
The only problem with this is that I told him the reason for my call was that we are struggling to make ends meet and that the payment is too high. Even when we refinance to a 30 year fixed at 5.375% (currently at 6.375%) our payments actually went up slightly; doesn’t help us because we are having trouble paying the mortgage month to month. Not to mention the fact that there would be nearly 9k added to our 154k loan just to refinance (mind you many fees were waived because of the refinance being steamlined, but 9k?). It just doesn’t seem to make much sense in our situation.
I had to talk to someone in another department about loan modification who was extremely rude. She took my particulars (income, expenses, savings, etc.) and after about 20 minutes said we can’t help you. We have no options for you at this time. But before I could even respond she wanted to know when I would be making the next month’s payment.
Then I decided something didn’t seem right, what about Obama’s plan? Every time I mention the “Making Home Affordable Plan” I pretty much didn’t get a response, other than that doesn’t really apply here. I guess maybe since I don’t have an ARM things aren’t applicable to me?
So I contacted the HOPE Department and was able to speak to a counselor about our situation. I explained to him the only option that was given to me from Countrywide that seemed like a straight refinance but should have not have probably been offered due to the amount of debt we have in relation to our income. He mentioned our low income should have disqualified us from the refinance. Anyhow he took our information and was going to forward the information to Countrywide asking for them a loan modification under the “Making Home Affordable Plan”. He said it would take upwards of 3-4 weeks. I have since received an outline of the notes he took during our conversation so I’m assuming Countrywide has since received them also.
Maybe in a couple more weeks I’ll know if they are willing to work with someone on a loan modification that doesn’t have an ARM loan.
Good luck.
What is the definition of a hardship under the loan modification guidelines? Does a cutback in overtime hours and the fact that I now have two children 3yrs and 16mos. and making ends meet is very difficult. It really is difficult living paycheck to paycheck. I also have yet to file a tax return for ‘08 sent in extension but I’m working on that now and prop. tax second installment is late and should be paid in approx 1-2 mos. Are these items critical before starting the loan modification precess or do I have to get them squared off first? Any help is greatly appreciated. thanks
I would like to see if you can help me with my home
Do you have a question that we can try to answer?
My husband and I are looking to do a loan modification for our mortgage although our mortgage is $70 under 31% of our pretax gross income. Do you think our servicer will “let it slide”? We have a new baby and I am a new stay-at-home parent (so we are depending on just my husband’s income now). We are struggling to pay the termite renewal, baby diapers, food, etc. We are not behind on our mortgage payments, but we are stretched so tight and our house is worth 50k less than what we bought it for in 2005. Please offer some insight! Thank you!
Im working with a counselor at ACORN to discuss a modification. My current loan is at 37% of my gross income. THe 1st time the girl ran my numbers she left out my condo association dues and told me I was at 30 % I checked her work after we got off the phone I discovered the error and that I was at 37%. I discussed it with her and she said I was still not eligible because I had $375 GROSS money left over in my budget and they want my payment to be at least 38% of my income before they’ll look at my loan. WHat gives? DO they want me to pay 31% or less towards my loan or be paying 38% or more before they’ll help?? Am I to understand Im not allowed to have any money left over to save in my monthly budget?
Krystle – The trick to qualifying for a Making Home Affordable Loan Modification is to have a current “front-end” DTI of over 38%, and a proposed front-end DTI of 31%. In plain English, this simply means that if you divide your current housing expense by your gross income, it must be above 38% (currently). To calculate what your new mortgage payment will be, simply work backwards: Multiply your gross monthly income by 31%, subtract monthly taxes and insurance; this leaves you with your “affordable” monthly payment. Your lender will help you achieve this monthly payment by modifying your loan to a 30 year term or 40 year term, at the appropriate interest rate. Additionally, make sure that your bottom line net income expenses (including all bills and household expenses) are currently negative, and that after your proposed savings on the modification, your bottom line net income will be positive.
So this plan wants people to pay 31% of their income towards housing but all those people who are paying more than 31% but fall within 32%-37% are up you know what creek without a shovel? This sucks.
We tried to get the 1st at 8.5 % fixed modified by US Bank and it was denied. We asked to reconsider and they have been doing so but it has now been three months. We were told this week that it could be 6-8 more weeks. HFC has our second at 10.5 % and they denied it. We asked why and were told they could not tell us. So much for help
Hi, i havea tax lien on my property from 2004 FROM THE IRS THAT I DID’NT REALIZE. I HAVE A WELLS FARGO MORTGAGE. I AM TRYING TO GET A LOAN MODIFICATION LOAN BUT THEY WILL NOT CONSIDER A LOAN AS LONG AS THERE IS A TAX LIEN ON THE PROPERTY. CAN YOU TELL HOW I CAN GET A LOAN MODIFCATION WHILE I WORK ON REMOVING THE LIEN? THANKS.
Did you ever get your loan modified? i have a client with a tax lien that cant refi were you able to get it done?
I was told that my net expenses should be positive by a couple hundred dollars. Is that not accurate? Right now my figures show -$300 per month with my old mortgage rate. Any help would be appreciated. I am submitting our hardship package tomorrow.
Am eligible for HAMP due to job loss and am current in mortgage payments, Have a few months savings. Can I put my house up for sale and still qualify? If so, should I list it now or after modification?
I submitted paperwork to Bank of America for the Making Homes Affordable Program under the Obama Administration in October 2009 for a modification. However, Bank of America has not contacted me to complete the processing of my application. Instead, they called me about a refinancing option that I did not apply for. When I asked Bank of America about my modiciation application, they said it had expired. I was very upset about this and called them again. When I called them again on November 13, 2009, they took my new financial information (bills that I currently pay and my income) and said it would take two weeks to process. Monday, November 23rd, 2009 will be two weeks. If I do not hear from them by November 23rd, 2009, what would you suggest I do? I have never been late or missed a payment since I have had a mortgage. However, December 2009’s payment is going to be difficult to make, so I need to settle this before December 15, 2009.
Michael,
You replied to Krystle 9/1/09. It sounded like you are pretty familiar with how this loan modification process works. Can you please answer my question regarding whether or not I should be making my monthly mortgage payments. While I’m in the process of the Making Home Affordable Loan Modification. I’m already one month behind and will have to go out on a limb, borrow, to come up with this months mortgage. But I’m afraid of getting to far behind. I also heard if I become three months delinquent I may not qualify per the rules. Please respond and clarify Thank-You .
If anyone else can help by answering my questions it would be greatly appreciated.
I am in the middle of a loan mod. through Wachovia [a previous World 'Pick A Pay loan']. Just waiting for an offer in the mail and calling them every week.
My question is:: Will my HOA dues be included in my new monthly payment?? I have researched this loan mod. program HAMP and I’ve seen on several sites that it WILL include the HOA dues. Please find this out for me, as Wachovia tells me that it is NOT true.
Thanks, Linda
I applied for modification in 9/08 originally.. in December they approved it I believe through the Hart program (I has stopped making my payments because i was struggling) and they sent me the paperwork but I never received because UPS couldn’t not deliver because en route they ran into a flood somewhere..I was not informed but in keeping in close contact..a month later they told me it was restarted again because I did not get the papers in on time (go figure)..now they told me I should know in another 2 months which brought me to March 2009..(still not able to make my payments now 6 months behind)and they told me that I did not send in the further income papers they needed..I was never informed by writing or by phone they needed something..anyway I was furious again..and it was restarted again..meanwhile in March I was placed on a medical leave and could no longer work because I needed a hip replacement so I was going to be out of work for a while..at this point I was still eligible for MHA because of the small amount of child support I receive ($4400/year)..it is now January 2010..I have had my hip replacement finally in August and I am ready to get a job and get back to work as a nurse (I am a single parent with a 6 year old) and after several calls to Countrywide(now Bank of America) through these months with not one manager, service person giving me the same answer twice.. they are still unable to tell me whether I am even eligible for MHA. I have been told it is still with the negotiator (and they have changed a few times in this time)..my whole life is on hold waiting to see what they are going to do with my loan/house..originally I owed 300,000.00 interest only, 1500.00 quarterly for taxes due to a septic lein/loan from the town and 57000.00 at prime for my home equity loan..now I am 28000.00 in arrears on my first mortgage and my home equity loan is up to date. The taxes and home insurance were taken over by Bank of America and escrowed..So anyway that is my sad story…still waiting…any insight or suggestions other than “start packing” would be appreciated!..Thanks, Lauren
After 1 year 3 months I received a Final Loan Mod. with Chase. Keep calling emailing. It was very long stressful sleepless nights. I just got the fed ex package Friday. They gave me a 3.99% for 5 years. But, by the time they added up there fees and whatever they could dream up it added another 30,000 to my loan. But the payments are reasonable and I’ll probaby be dead before it is paid off anyway. But keep calling email keep names and send in doc they will say they never received them it is a stall tatic but do it anyway and make sure your docs are complete. Our mod was MHA. Iknow what all of you are going thru I can actually sleep all night now and wake up with a good attitude. good luck
We were given a loan modification back in July/08, that included taxes and insurance. The basic terms was for us to make the 3-trial payments and afterwards they would continue the monthly payments for 30 years. The new monthly payments was great! However, after making payments for two of the three months they never made the payments to the insurance company or to the county.
Also my payments were interrupted after my insurance company previously had our permission to deduct our monthly insurance payments and they continued to do so, causing our mortgage payments to bounce and we were accessed fees. Now after contacting Litton Loan and my insurance agent neither one had a record of an escrowed account ever being established. Yet we’ve been receiving monthly invoices that clearly indicated the separation of the monthly payment and escrowed payments. So they’re now trying to foreclose on our property on 2/26. We sent them all the info necessary for a MHAP back in Dec. and they refused to respond back to me. So I am now trying to get them to once again consider another loan remodification after ceasing payments back in Nov., but, this time under the MHAP. So I’ve contacted a community action agency in my area and after (1) conference phone call… they’re working on another loan modification. Make sure they are following through with your agreement!!!!!
Also understand that filing Bankruptcy Chapter 13, will/can save your home and give you time to catch up “IF You Have Income,” or you can file Chapter 7 and tell them to keep the house, take your funds and start over new and give yourself a new direction and outlook on life, don’t look back. remember the house is in foreclosure not you… tough times requires tough measures… we are all tough we’re dealing with the bankers who we bailed out… let them have it back if you can’t afford it, let them eat the lost. better them than us.