Today, the Federal Housing Finance Agency (FHFA) announced a simplified, streamlined loan modification program to reduce foreclosures and get struggling homeowners into mortgages that they can afford.
Here is the Q&A portion from the complete announcement:
Q: What is a modification?
A: A modification is a change to the original mortgage terms. It may include a change to the product (an ARM to a fixed-rate mortgage), interest rate, amortization term and maturity date, and/or unpaid principal balance. The change/s is made to create a more affordable payment for the borrower.
Q: What is a streamlined modification?
A: A streamlined modification is a modification that requires less documentation and less processing. In this case, the streamlined modification seeks to create a monthly mortgage payment that is sustainable for troubled borrowers by targeting a benchmark ratio of housing payment to monthly gross household income.
Q: What is the benchmark ratio?
A: This is the first time the industry has agreed on an industry standard. The benchmark ratio for calculating the affordable payment is 38 percent of monthly gross household income. Once the affordable payment is determined, there are several steps the servicer can take to create that payment – extending the term, reducing the interest rate, and forbearing interest. In the event that the affordable payment is still beyond the borrower’s means, the borrower’s situation will be reviewed on a case-by-case basis using a cash flow budget.
Q: Who participated in creating the Streamlined Modification Program? Is this identical to the FDIC’s IndyMac protocol?
A: This program resulted from a unified effort among the Enterprises, Hope Now and its twenty-seven servicer partners, Treasury, the Federal Housing Administration (FHA) and FHFA. In addition, we’ve drawn on the FDIC’s experience and assistance from developing the IndyMac streamlined approach and have greatly benefited from the FDIC’s input and example. To accommodate the need for more flexibility among a larger number of servicers, the Streamlined Modification Program does differ from the IndyMac model in a few areas. However, it uses the same fundamental tools to achieve the same affordability target.
Q: How is this different from Citi’s announcement today?
A: This effort complements efforts of those banks that have mortgage portfolios and can reach out directly to borrowers for loans they own and service. This is a significant announcement in that Fannie Mae, Freddie Mac and FHFA have mutually agreed as major investors to a single streamlined modification program with a common affordability standard. The majority of HOPE NOW banks who own portfolio mortgages will adopt or offer programs as or more aggressive then what’s being announced.
Q: What is the role of HOPE NOW?
A: HOPE NOW has the leading servicers as members. HOPE NOW collaborated with Fannie Mae, Freddie Mac and FHFA on arriving at a standard that is consistent and addresses the capacity challenge for servicers dealing with increased delinquencies. This will take on-going work to implement for servicers. We anticipate this being implemented by December 15th.
Q: Why is there not a foreclosure moratorium?
A: Any borrower who qualifies and responds to the servicer will be given the opportunity to provide the required information for consideration. If necessary, the scheduling of a foreclosure sale will be suspended. A suspension requires that the borrower maintain contact, desires to keep his or her home, has the ability to make the affordable payment offered, and promptly respond to requests for information and signed documents.
Q: Why is it necessary?
A: With the rise in serious delinquencies and increasing number of loans in foreclosure, this program will help borrowers who have missed three or more payments, but want to keep their homes. Because the eligibility requirements and process are streamlined and consistent, the program will allow servicers to reach more borrowers more quickly.
Q: Who is eligible?
A: The highest risk borrower, who has missed three payments or more, owns and occupies the property as a primary residence, and has not filed bankruptcy. The loan is a Freddie Mac, Fannie Mae or portfolio loan with participating investors. To qualify for the streamlined modification, the borrower must certify that he or she experienced a hardship or change in financial circumstances, and did not purposely default to obtain a modification.
Q: Why must the borrower be 90 days delinquent? Why not earlier in the delinquency cycle?
A: This is a streamlined solution targeted to reach the most at risk borrower. For borrowers who do not qualify, other solutions are available. This in no way substitutes for the meaningful efforts by all servicers and investors that are currently in place. The 212,000 workouts reported by HOPE NOW in September are testimony to that fact. We will continue to see those efforts produce meaningful results.
Q: How many people will this help?
A: While difficult to assess, it is clear delinquencies are predicted to continue well into 2009. Foreclosure estimates are significant. Having a streamlined approach will assist many borrowers who default and more quickly. We estimate this will ultimately help thousands of borrowers.
Q: What if a borrower is not eligible but still wants to save his/her home?
A: If the servicer is unable to create an affordable payment with this streamlined program, it will further evaluate the borrower’s situation via the standard process. The standard modification program requires a personal cash-flow budget customized to the borrower’s situation.
Q: How do borrowers apply?
A: To be considered for the program, a seriously delinquent borrower should contact his or her servicer and provide the requested information – monthly gross household income, association dues and fees, and a hardship statement.
Q: How do borrowers complete the modification process?
A: Upon receiving the Modification Agreement from the servicer, the borrower signs it and returns it with the 1st payment at the modified terms along with income verification. Once the borrower makes three payments at the modified terms and the account is current as of day 90 of the modified plan, the modification is complete.
Q: What are the goals of the program?
First, we hope that other industry participants — portfolio lenders and representatives of private label security investors – readily and rapidly adopt this program as the industry standard. Second, the program could increase the number of modifications significantly. Third, broad acceptance and effective implementation could stabilize communities and property values.
Q: When will servicers start offering this program?
A: We expect that by December 15th, servicers will be positioned to work with eligible borrowers.
Q: Will servicers get more details on this program?
A: Both Fannie Mae and Freddie Mac will be communicating directly with their approved servicers through an announcement, letter or bulletin.
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Comments
22 Comments so far
bledar
DOES THESE APPLY TO MORTGAGES FROM THE DEUTCHE BANK? CAN SOMEONE HELP ME? THANK YOU
Frederic
I have my mortgage at Wells Fargo. Are there any programs set up with them to assist homeowners with modifications or adjustments?
Mary Miller
I think the best way to find out if your bank is participating in this program or any other loan modification program is to call them and ask.
Justin McHood
@Bledar, @Frederic:
Mary is right — because of the different lenders and the different loans that each lender has in their own portfolio, each lender is dealing with loan modifications in their own way.
And to make it more confusing, sometimes you can call a lender, speak with 2 different people and get 2 different answers.
The key is that if you are currently having problems making your mortgage payment, you need to be talking to your lender on a regular and ongoing basis. Don’t just call them once and take whatever the person said to you as “the way it is”.
As crazy as it sounds, the loan modification rules are changing sometimes daily right now and lenders who wouldn’t work with you last week now are willing to work with you.
So if you are being told “no” when seeking a loan modification from your current lender and you are late on your mortgage payments… my first question would be “how many times have you called them?” and if it is less than 10, keep trying.
Lastly, if you have tried talking to your lender 10+ times and you are still getting nowhere, it might be time to take it to the next level. You can hire a loan modification company to “help” you get your loan modified and there have been a handful of great blog posts here on Zillow about how to find a good loan modification company.
Don’t give up!
“Stay In Your Home for the Holidays” Says Freddie/Fannie | Zillow® Blog
[...] sales scheduled between Nov. 26 and Jan. 9, giving borrowers and lenders time to consider a new loan modification plan aimed at assisting borrowers who have fallen more than 3 months behind on their loans. For many, [...]
jo
i’m with citi res.lending are they part of this program?
i have been in thier system trying to get a loan modification for some time with no ansers
Susz Lay
I have a loan with CitiMortgage and it’s a Fannie Mae loan. I asked for an SMP (streamlined mortgage plan) and they’ve Never Heard Of It!!!!! Why???
Vee
Hello there
Wells Fargo is offering this program,,,,, but,,,,,, you must have your mortgage payments in good standing. They also offer the bi-weekly program payments without a charge.
luis
I AM CURRENTLY ATTEMPTING TO GET MY MORTGAGE LOAN MODIFY ARE THERE ANY REPUTABLE COMPANIES OUT THERE THAT ANYONE CAN RECOMMEND,,,THANX
Loan Modification
This is great because it requires less documentation and less processing. Hopefully more agencies will follow their lead.
Loan Modification Lawyer
I feel anything that is streamlined will place the borrower at risk of taking a loan modification that is not in their best interests.
It is best to obtain legal advice before signing on the dotted line.
You can get help for free at http://www.loansafe.org/forum and also from http://www.hud.gov.
Keep up the fight!
BB
We are with Wachovia and they have not helped with the streamlined
modified plan, What do we do to get the plan? We also have a heloc
line of credit. How does it all work?
Marcel
I am starting to hear about this great program. The requirements to qualify are not that bad ( http://www.HopeNowMortgages.com has everything) but I don’t know anyone that already has have a successful modification.
I still like more the Hope for Homeowners program ( also in that site) because it forgives part of the principal ( the SMP is forbid to do it)
stacy
call a hud counsler at 1800-569-4287 Dont talk to your morgage company about your situation until you have spoken to a hud counsler
Louie Frias
Homeowners should ask themselves if an attorney is actually working on their case and since its illegal for any attorney to guarantee the outcome of any case, how is it that everyone throws the word guarantee around? (Most likely NOT being said by attorneys, rather those who haven’t a clue of what they’re doing.) More likely they’re NOT involved with an attorney and they use that word to falsely assure the homeowner that their hard earned money will be returned. TIP: Attorneys do not have “money back guarantees.”
Why not deal with experienced professionals from the very start? An expert will know if the consumer even has a shot at success. Experienced mortgage bankers with underwriting backgrounds are the only way upfront, that you can ever know if your loan will be approved…the same if true for loan modification. Don’t just believe that some intake interviewer will know this. All that persons job is is to gather data, your check and turn your file in to someone who is supposed to be able to determine your chances…the person you initially speak with should be highly qualified to do this and not raise your hope or delay your answer.
http://www.FederalHomeLoanMods.com
Jeannine
I got a deal from my mortgage company under the streamlined loan modification and we received it for my loan on the 24th and the mortgage company wants a payment within 4 day or this will expire. 2 of those days being a weekend. They drew up the papers 11 days ago that they are dated. They also want 2 of the monthly payments each month for a Trail period which they did not state when it would end. Does that seem correct?? Plus my mortgage principal balance is higher than the original loan. I tried calling the mortgage company which there automated system says they are opened 24 hours a day then when I get to the end of it, to talk to a person it says they are closed. This all sounds great until the mortgage company actually sends you the paperwork. I need help to clarify the guidelines of the streamline loan modification.
Keely Jared
I’ve had so many clients ask me about loan mod’s and while I’ve helped a few find success, it’s a full time job getting the lenders to respond. Sometimes, when possible depending on your equity position, it makes sense to refinance into a less costly loan. Every situation is different. If anyone wants to discuss options in person, I’m available by phone or email. It never hurts to have another person championing your cause with your bank or investigating other options. Best of luck.
kathy arndt
Iwas sent a loan modification by Ocwen to lower my payments,but I dont know what a ballon discloser means. Iam paying 8.6 interest and it is to go to 6.35%Iam one month and now will be two plus late fees , of almost $2,800.oo behind do to hard times .They tell me the loan is done 2027 .,so then what will happen?
kathy arndt
What ia a ballon closer
Chris
For the Ocwen deal…here it is… the late fees and the owed 1 month or so of mortgage are all rolled up into a ball. They are placed at the end of loan in what is called a “balloon”. It is a one time payment at the end of the loan. You will now be current on your mortgage, your credit score will go up, your rate is reduced. You just have to now pay the new lower amount every month. FHA has given fed money from the bailout to Ocwen…that is why this is being offered. What’s the catch?..well…not really a catch. Bailout money agreement…the balloon at the end of the loan,…yeah, will be larger than a normal payment…estimate a 2 or 3 month payment…but if you are 25 or 30 years away from that,…who cares. By then you will have either sold, be able to refinance, etc… so much can happen between now and then. This program can be a nice help.
Chris Wilson
If you have a fannie/freddie backed loan, you are eligible for the HAMP if you meet the other qualifying guidelines. you must have a hardship, live in the property, show insufficeint liquid assets to pay your mortgage, and have a DTI between 31-38%. If these are met, then you should be approved for the modification. However, many banks are disqualifying borrowers for unprepared submissions. You only have one shot at this modification, so its in your best interest to file correctly. You do not wantto miss out on this great opportunity. In all honesty, you probably will want to hire a real estate attorney to handle the process. They understand how the process works and they have legal backing. Be careful to not move forward with companies that are promissing rates or reductions.feel free to email me if you have further questions
Free Loan Modification Kit
I dont believe this new plan will really make an impact, but its a step in the right direction and thats always a good sign…