New Fannie Mae and Freddie Mac Loan Modification Guidelines for July 1, 2013

If you're still an "underwater" homeowner of a single family residence, a condominium, a second

Did you buy when the market was high?

home, or an investment property with a mortgage owned or guaranteed by Fannie Mae or Freddie Mac, you might be eligible for sweeping new changes as of July 1, 2013, known as the "Streamlined Modification Initiative."

Past programs for helping borrowers modify their loans met with less success than hoped for, and Fannie Mae/Freddie Mac are now offering eligible borrowers the opportunity for less documentation and document collection which also removes administrative issues for the lender.  Under this new program, borrowers are not required to document their hardship or financial situations.

This program ends August 1, 2015, so it's basically in effect for 2 years.

What are the borrower eligibility requirements?

• The loan must be owned or guaranteed by Fannie Mae or Freddie Mac.
• Homeowners must be 90 days to 24 months delinquent.
• There must be a first-lien mortgage that is at least 12 months old with a loan-to-value ratio equal to or greater than 80 percent.
• Loans that have been modified at least two times previously are not eligible.
• The borrower must participate in a trial payment plan period of 3 months.

Loan servicers, i.e, Bank of America, Wells Fargo, Chase, or whomever handles your loan payments, will be required to send a Streamlined Modification Solicitation Offer to borrowers who are at least 90 days delinquent and meet the initiative’s eligibility requirements.  The HAMP program (Home Affordable Modification Program) is still available to borrowers, and may offer more favorable payment options to the borrower, however it also requires borrowers to meet certain guidelines and submit full documentation. 

If you are considering selling, and are not yet 90 days delinquent on your loan, you should carefully consider your plan of action.  The proposed monthly payment may or may not be satisfactory to you under this Streamline program, and as a seller, you would ideally have a very clear picture in your mind as to the direction you are going to take.  Borrowers should be aware that "strategic defaulters" will be screened for in advance, so if someone is purposely defaulting in order to obtain this program, Fannie Mae and Freddie Mac will be on the lookout for that.

Interestingly, some property owners are not aware of current selling prices in their local market, so obtaining a good market valuation on your property should be a first priority. If your property is a candidate for a non-short sale transaction, you could move on. If on the other hand, you would rather stay put and not sell if you obtained a better mortgage payment, you should find that out as soon as possible to avoid being an unmotivated seller at this time.

For more details about this program, or to find out if you have a Fannie or Freddie mortgage, please contact me via e-mail or phone, I will welcome the opportunity to help you. I serve the Long Beach, Lakewood, Cerritos, Cypress, Seal Beach, Los Alamitos, and San Pedro areas, including adjacent cities such as Huntington Beach.

Staying on Top of HAMP, HAFA and HARP Homeowner Programs

Staying on top of the string of programs created to help owners caught up in the perfect storm of a high unemployment, rampant underemployment and declining home values, can be confusing to say the least. Here’s a brief overview of the acronyms spawned by the foreclosure crisis:

• HAFA—The Home Affordable Foreclosure Alternatives program was designed to help homeowners to avoid the negative effects of foreclosure by establishing incentives for completing a short sale or a deed-in-lieu of foreclosure. In a short sale, the loan servicer accepts a loan payoff amount from an underwater borrower that is less than the amount actually owed on the first mortgage. With a deed-in-lieu of foreclosure, the borrower transfers ownership of the property to the loan servicer. HAFA provides for $3,000 in relocation assistance after a successful short sale or deed-in-lieu. Which  route you go depends very much on your immediate and longterm situation--before you act, you should consult with a professional for your options.
• HAMP—The Home Affordable Modification Program was designed to help homeowners who are no longer able to make mortgage payments on time due to decreased income or an increase in the monthly payment amount. HAMP reduces a homeowner’s monthly mortgage payment to 31 percent of gross income following a series of steps on the part of the mortgage servicer that can include a rate reduction, a term extension of up to 40 years, deferred principal payments, and (possibly) a lowering of principle. Here is the link to the list of servicers or banks agreeing to participate in this program. On the Loan Lookup tool, you may be able to find out if Fannie or Freddie own your loan.
• HARP—The Home Affordable Refinance Program enables homeowners whose mortgages are backed by Fannie Mae or Freddie Mac and who owe more than their home it’s worth, to refinance and take advantage of today’s historically low interest rates. Originally, HARP was only available to homeowners whose first mortgage did not exceed 125 percent of the current market value of their home.
• HARP 2.0—Starting Dec. 1, 2011, the 125 percent loan-to-value ratio will be eliminated, enabling eligible borrowers to refinance under HARP regardless of how far underwater they are on their mortgage.

Making your way through the maze of programs can take time -- and the situation is often more complicated than it looks at first. Take this survey or contact me for additional help contacting or concerning your servicer, and finding out if your loan is owned by Fannie or Freddie.

And, homeowners looking for information on the national mortgage servicing settlement announcement by the Department of Justice should visit NationalMortgageSettlement.com. Click on the logo below for more information:

Why Some Loan Modifications Are So Hard to Get

So far, only 17% of borrowers nationally have completed a loan modification and made it through the trial payment period under the Home Affordable Modification Program (HAMP) guidelines. One of the problems is that the HAMP guidelines only factor in the payments made on the 1st mortgage, and do not include the borrower's 2nd mortgage if there is one, which is often up to 20% of the original purchase value, and other total family expenses.  Fewer borrowers can qualify, and thus end up in foreclosure anyway.

But there are other reasons too, which may have to do with why you, the borrower, or you the Realtor, keep faxing in requested documents and short sale packages, over and over after the people at the bank say they never received it, or it got lost. Or why the bank foreclosed anyway, even though it had a viable buyer and a loan ready to fund one day before the sale date.  Sometimes lenders really don't want to modify a loan.

There is such a thing as Net Present Value (NPV) a complex model designed for HAMP to be used by lenders and loan servicers which is to determine if the borrower meets certain tests. However, the input criteria for those tests is not disclosed to the public. So if a borrower calls up his/her (HAMP) bank at the bank's or servicer's designated number and receives the response that they do not qualify for a loan modification, it may be because the representative is using the NPV software program which performs automatic calculations.  The FDIC, however, did publish their NPV model, shown on page 3.

If you are a borrower and want to know if you can avoid a long long wait to find out from your bank if you qualify for a loan modification under HAMP guidelines based on the NPV model for which the government is allegedly unwilling to publish the critical parameters, then you might want to try out Martin Andelman's offer to use his software which he says is using HAMP guidelines.
If your bank thinks your home is worth more than your current loan balance, it will not have a lot of incentive to modify your loan because it will pay them to go into foreclosure, and then put it back on the market as an REO.  And another stickler in the side of the Obama Administration are the investors who bought securitized mortgages that were sold in bundles, by Well Fargo to Goldman Sachs as one example, and now those investors are a player in the whether or not your loan gets modified:

The names of investors who actually buy mortgage-backed securities aren’t publicly available, but typically they can be foreign governments, 401(k)s, college endowments and pension funds. . . . "there could be literally anywhere from one to commonly several dozen institutional investors, and those institutional investors will be representing literally thousands of pensioners and individual investors,” says Bill Frey, head of Greenwich Financial Services.

And banks say they may have agreements with those investors, and may say they are the reason a certain loan cannot be done, but may also be unwilling to provide specific information about their "agreements."

There is more to this story, but if you are a borrower attempting to get a loan modification, be aware that not all banks are letting the timelines go by beyond what's required by law for issuing a Notice of Default and a Notice of Sale. Banks are not chartered to hold real estate, even though many are doing just that. Do not be afraid to contact a qualified tax advisor, an attorney who specializes, and/or a Realtor about your options concerning foreclosure, a short sale, or bankruptcy. The best of all possible worlds for most people is to get their loan modified, but are you going to be one of the 17% who do, and how long are you willing to wait to find out?