Many times when I speak with someone about the “rules of loan modification”, I explain that there really are no rules – that the process varies from lender to lender.
With the announcement of a new “Streamlined Loan Modification Program” from the government, I suspect that the rules of loan modification will become more clear for many people.
Fannie Mae has been working with FHFA and 27 different lenders and servicers in the HOPE NOW alliance to implement the Streamlined Loan Modification Program – so there is a great chance that your lender is participating.
Under the Streamlined Loan Modification Program, your mortgage and escrow payments can be cut to 38 percent or less of an eligible borrower’s gross monthly income by some combination of:
- reducing mortgage rates
- extending the mortgage term up to 40 years
- forbearing on a part of the principal amount until the loan is paid off, then a balloon payment is required
Streamlined Loan Modification Program Eligibility Requirements
- You must own and occupy the property as your primary residence
- You must have missed at least three mortgage payments
- You cannot have filed for bankruptcy
Streamlined Loan Modification Process – Trial Period
The streamlined process allows you to sign a single document at the outset of the modification process that establishes a new monthly payment during a three-month trial period, and also sets forth the modification terms that will be permanent if you make the modified payments during the trial period.
Who To Contact about the Streamlined Loan Modification Program
Borrowers should contact their servicers if they think they may qualify. At the same time, servicers will be identifying eligible borrowers and reaching out to them through the mail.
If an affordable payment cannot be achieved through the Streamlined Modification Program, lenders will still be working with people through the “traditional” modification process — or in other words, every situation is different and will be handled differently.
Learn How To Get Your Loan Modified On Your Own Without The Help Of An Attorney
Other Streamlined Loan Modification Program Official Press Releases
Federal Housing Finance Agency Press Release
Paul’s Comment:
Justin – great tips. Although a bit in self-interest (since I am a lawyer who helps clients with loan workouts), it should also be pointed out that having an attorney represent you will ensure that you are aware of other considerations when making the decision about loan modification, short sale or going into foreclosure. Particularly important in Arizona are the anti-deficiency statutes, but also important are considerations surrounding taxation on any forgiven debt amount in a foreclosure or short sale situation. Secondly, as you pointed out, a letter or call from an attorney to a lender’s loss mitigation department often perks up a few ears and can speed up the process.
While I don’t have experience myself with these quickie loan modification outfits, I expect that many of them are not equipped to advise homeowners on these issues – so homeowners should tread carefully, particularly if attorneys are not involved.
Great blog and I look forward to checking back for more updates. I will be covering some legal issues relating to loan modifications on my blog at http://www.desertlawblog.com from time to time.