Fannie Mae Launches Distressed Borrower Education Site

August 9, 2010

 

Fannie Mae launches a borrower-facing outreach site designed to educate distressed homeowners on potential retention strategies and foreclosure alternatives.

The online education resource — available in both English and Spanish — offers calculators to demonstrate to borrowers the mechanics of refinance, repayment, forbearance, and modification options if the borrowers would like to keep their home. In addition, it covers information on Fannie’s Deed-For-Lease program, which allows borrowers to become renters in the same property after pursing deed-in-lieu of foreclosure.

For borrowers who would like to leave their home, the online education resource offers possible options such as, a short sale and deed-in-lieu of foreclosure when you can no longer stay in your home but want to avoid foreclosure.

For borrowers who aren’t sure what the best option is for them, the Options Finder can assist you. By answering some questions, the Options Finder determines which option may be right based on your current situation.

When you need additional assistance, the Resources section offers the following and much more:

Fannie Mae Resources

Review what Fannie Mae is doing to assist homeowners and how they can help you.

Contact your Mortgage Company

Find and contact your mortgage company to discuss your situation.

Helpful Forms

Download forms to help you prepare for (and keep track of) working with your mortgage company or a housing counselor.

Calculators

Use the calculators to determine which scenario fits your needs.

Frequently Asked Questions

Search for helpful answers to some of the most common questions regarding your options.

Take Action – What You Should Do Next

Once you ‘ve learned about options that may be available for your situation, it’s time to take action.

Step 1: Research

Be sure to bookmark the page and print the information on the option(s) that applies best to your situation. You will want to refer to this information when speaking with your mortgage company.

Step 2: Gather

Gather the information shown below. You’ll need this information handy so you can refer to it during your discussion with your mortgage company. Use the Financial Checklist to help get organized and prepared.

  • Your mortgage(s): Loan number, past due notices, monthly statement, etc. for your first mortgage and second mortgage or other liens (if applicable).
  • Your other debts: Copies of bills and monthly statements for all other debts such as credit cards, personal loans, auto loans, utilities, etc.
  • Your income: Paystubs, unemployment benefits letter, alimony, child support, etc. for all borrowers on the mortgage.
  • Your hardship: Explain your situation and any hardship that has affected your income or ability to make your payments, etc.

Step 3: Contact

Contact your mortgage company and ask them about the options that are available for your specific situation. Also ask for the name and/or employee number of the mortgage specialist who is helping you and be sure to give them your up-to-date contact information. Use the Contact Log to keep track of your conversations and follow-up items.

Step 4: Discuss

Make sure you are ready to discuss everything about your current situation—the more the mortgage company understands and the more accurate the information, the more they can help you find the right option.

Step 5: Confirm

Ask them to confirm your current situation to be certain there are no other issues. Make sure you understand the next steps involved and if there is anything you will need to complete for the specific option.


Home Affordable Unemployment Program (UP)

July 6, 2010

 

The Home Affordable Unemployment Program (UP) is a supplemental program to the Home Affordable Modification Program (HAMP) which provides assistance to unemployed borrowers. The Unemployment Program grants qualified unemployed borrowers a forbearance period which reduces or suspends their monthly mortgage payment.

***Note:  UP is for first lien mortgage loans that are not owned or guaranteed by Fannie Mae or Freddie Mac (Non Government-Sponsored Enterprises (GSE) Mortgages) or insured or guaranteed by a federal agency, such as the Federal Housing Administration (FHA).***

The program is effective for participating HAMP servicers on July 1, 2010; however, servicers may begin to offer UP earlier.

Eligibility

Servicers are required to offer UP when the following criteria is met:

  • Loan is a first lien mortgage, originated on or before January 1, 2009, secured by a one- to four unit property, 1-unit of which is the borrower’s principal residence and the unpaid principal balance (UPB) is equal to or less than $729,750 on 1-unit properties (See Supplemental Directive 09-01 for amounts on 2 – 4 unit dwellings)
  • Loan has not been previously modified under HAMP and the borrower has not previously received a UP forbearance period
  • Borrower is unemployed at the date of the request for UP and is able to document that they will receive unemployment benefits or have been receiving unemployment benefits at commencement of the forbearance plan
  • Servicers have the discretion whether or not to require a borrower to have received unemployment benefits for up to 3 months before commencement of the forbearance plan
  • Borrower is either delinquent but has not missed more than 3 consecutive monthly payments or default is reasonably foreseeable

It is at the servicer’s discretion whether to offer UP if a borrower’s total monthly mortgage payment is less than 31% of the borrower’s monthly gross income.

Additional UP forbearance plan eligibility requirements include that the borrower:

  • Makes a request before the first mortgage lien is seriously delinquent (before 3 monthly payments are due and unpaid). A request for UP may be made by phone, mail or email. Within 10 business days, servicers must confirm the receipt of the request with the borrower via mail or return email.
  • Is unemployed at the date of the request for UP and is able to document that he or she will receive unemployment benefits in the month of the Forbearance Period Effective Date even if his or her unemployment benefit eligibility is scheduled to expire before the end of the UP forbearance period.

Terms

The UP forbearance period is 3 months or upon notification that the borrower has become re-employed; however, it can be extended in accordance with investor and regulatory guidelines.

The monthly payment MUST be reduced to 31% (or less) of the borrower’s gross monthly income. At the discretion of the servicer, monthly mortgage payments may be suspended in full.

Payment amount and due date, if any, is established by the servicer according to investor and regulatory guidelines.

Servicers are prohibited from:

  • Initiating foreclosure action or conducting a foreclosure sale while the borrower is being evaluated for UP
  • After the Foreclosure Plan Notice (FPN) is mailed
  • During the UP forbearance or extension while the borrower is being evaluated for or participating in HAMP or HAFA following, the UP forbearance period

A borrower in a permanent HAMP modification that becomes unemployed is not eligible for an UP forbearance plan.

A borrower who was previously determined to be ineligible for a HAMP modification may request consideration for an UP forbearance plan if the borrower meets all of the eligibility requirements.

If the servicer is requiring a reduced monthly payment, the borrower’s reduced payment MUST be received by the servicer on or before the last day of the month in which it is due.

If the borrower fails to make timely payments, the UP forbearance plan may be canceled and the borrower is not eligible for HAMP consideration.

Reporting Requirements

To Credit Bureaus:

The servicer should continue to report a “full-file” credit report to each major credit repository.


HAMP 2nd Lien Modification Program (2MP)

June 16, 2010

 

***UPDATE:  Click HERE to view a 30-minute self-guided tutorial that provides an overview of the Second Lien Modification Program (2MP) for servicers of non-Government Sponsored Entities (GSE) loans.***

Note: If you are having a problem accessing the tutorial, email me at lauren@lossmitigationmasters.com

Many homeowners may be struggling to make their monthly mortgage payments because they have a second lien.  Even when a first mortgage payment is affordable, the addition of a second lien can sometimes increase monthly payments beyond affordable levels.  Second liens often complicate or prevent modification or refinancing of a first mortgage.

The 2nd Lien Modification Program (2MP) offers homeowners a way to lower payments on their second mortgage.  2MP offers homeowners, their mortgage servicers, and investors an incentive for modifying a second lien.  Servicers and investors may also receive an incentive for extinguishing a second lien, forgiving all of the debt a homeowner owes.

Homeowners must provide consent to share their first lien mortgage modification information with their second lien mortgage servicer, if they are different. Since 2MP is meant to be complementary to the Home Affordable Modification Program (HAMP), a homeowner must have their first lien modified through HAMP before the second lien can be modified under 2MP.

Under 2MP, with their investor’s guidance, a mortgage servicer may:

  • Reduce the interest rate to 1% for second liens that pay both principal and interest (amortizing)
  • Reduce the interest rate to 1% amortizing or 2% interest-only for interest-only second liens
  • Extend the term of the second lien to 40 years
  • If the principal was deferred (through forbearance) or forgiven on the first lien, a servicer must forbear the same proportion on the second lien; although a servicer may, in its discretion, forgive any portion or all of the second lien and receive incentives for doing so

A second lien is eligible for 2MP if:

  • the corresponding first lien has been modified under the Obama Administration’s HAMP and the second lien servicer is participating
  • it was originated on or before January 1, 2009
  • it does not have an unpaid principal balance (at consideration for the modification) of less than $5,000 or a pre-modification scheduled monthly payment of less than $100
  • it has not yet been modified under 2MP
  • it is not subordinate to a second lien or is not a home equity loan in first lien position
  • it is not a second lien on which no interest is charged and no payments are due until the first lien is paid in full
  • the second lien servicer is in possession of a fully executed 2MP modification agreement or trial period plan by December 31, 2012; or the second lien is not insured, guaranteed, or held by a Federal government agency (e.g. FHA, HUD, VA, and Rural Development)

Examples

Family A: Amortizing Second Mortgage

In 2006: Family A took out a 30-year closed-end second mortgage with a balance of $45,000 and an interest rate of 8.6%.

Today: Family A has an unpaid balance of almost $44,000 on their second mortgage.

Under the 2MP: The interest rate on Family A’s second mortgage will be reduced to 1% for 5 years. This will reduce their annual payments by over $2,300.

After those five years, Family A’s mortgage payment will rise again but to a more moderate level.

                                                 Existing Mortgage Loan Modification
Balance $43,942 $43,942
Remaining Years 27 27
Interest Rate 8.6% 1.0%
Monthly Payment $349.48 $154.81
Savings $195 per month, $2,336 per year for five years

Family B: Interest-Only Second Mortgage

In 2006: Family B took out an interest-only second mortgage with a balance of $60,000, an interest rate of 4.4%, and a term of 15 years.

Today: Family B has $60,000 remaining on their interest-only second mortgage because none of the principal was paid down.

Under the 2MP: The interest rate on Family B’s interest-only second mortgage will be reduced to 2% for 5 years. This will reduce their annual interest payments by $1,440.

After those five years, Family B’s mortgage payment will adjust back up and the mortgage will amortize over a term equal to the longer of (i) the remaining term of the family’s modified first mortgage (e.g. 27 years if the first mortgage had a 30 year term at origination and was three years old at the time of modification) or (ii) the originally scheduled amortization term of the second mortgage.

                                                Existing Mortgage Loan Modification
Balance $60,000 $60,000
Remaining Years 12 27 (term reset to the remaining term of the modified first loan)
Interest Rate 4.4% 2.0%
Monthly Interest Payments $220 $100
Savings $120 per month, $1,440 per year for five years

List of Participating Servicers

  • Bank of America (including Countrywide)
  • Citi Mortgage, Inc.
  • Chase (including EMC and WaMu)
  • Wells Fargo (including Wachovia)
  • BayView Loan Servicing, LLC
  • Servis One dba BSI Financial Services
  • iServe Servicing, Inc.

More servicers will be added in the near future as they join the program.

For more information, contact your mortgage servicer.




Home Affordable Modification FAQs

June 8, 2009

LoanModificationOptions

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.

Do I need to be behind on my mortgage payments to be eligible for a Home Affordable Modification?

No. Responsible borrowers who are struggling to remain current on their mortgage payments are eligible if they are at risk of imminent default, for example, because their mortgage payment has recently increased to a level that is not affordable. If you have had or anticipate a significant increase in your mortgage payment or you have had a significant reduction in income or have experienced some other hardship that makes you unable to pay your mortgage, contact your servicer. You will be required to document your income and expenses and provide evidence of the hardship or change in your circumstances.

I have a second mortgage. Am I still eligible?

Yes, but only the first mortgage is eligible for a modification.

How do I know if my servicer is participating? Are all servicers required to participate?

Servicer participation in the program is voluntary. However, the government is offering substantial incentives to servicers and investors, and it is expected that most major servicers will participate. Participating servicers will sign a contract with Treasury’s financial agent, through which they agree to review every potentially eligible borrower who calls or writes asking to be considered for the program.

What happens after five years?

If the modified interest rate is below the market rate, the modified rate will be fixed for a minimum of five years as specified in your modification agreement. Beginning in year six, the rate may increase no more than one percentage point per year until it reaches the rate cap indicated in your modification agreement. The cap is equal to the prevailing market interest rate on the date the modification is finalized as published by Freddie Mac based on a survey of its customers. This cap means that your rate can never be higher than the market rate on the day your loan was modified. If the modified rate is at or above the prevailing market rate, as defined above, the modified rate will be fixed for the life of the loan.

Will the modified loan include property taxes and homeowners insurance?

Yes. The modification payment will include a monthly amount to be set aside (escrowed) to pay taxes and insurance when they become due. This escrow is required even if your prior loan did not include an escrow.

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 a 2% interest rate does not result in a payment that is affordable (no more than 31% of your gross monthly income), your servicer will:

  • First try to extend your payment term. At the servicer’s option your payments could be extended out to 40 years.
  • If that is still not sufficient your servicer may defer repayment on a portion of the amount you owe until a later time. This is called a principal forbearance.
  • A portion of the debt could be also be forgiven. This is optional on the part of the investor. There is no requirement for principal forgiveness.

Could I end up with a balloon payment?

Yes. If your servicer determines that a principal forbearance is required to get your monthly payment to an affordable level, the amount of the forbearance, say for example this was $20,000, would be subtracted from the amount used to calculate your monthly mortgage payment, but you would still owe the money. You would have a $20,000 balloon payment that had no interest and was not due until you paid off your loan, refinanced or sold your house.

What happens if I am unable to make payments during the trial period?

Borrowers who are unable to make three payments by the end of the trial period are not eligible for a Home Affordable Modification. However, you may be eligible for other foreclosure prevention options offered by your servicer.

How much will a modification cost me?

Borrowers who are behind on payments or at risk of imminent default often do not have cash to pay for the expenses of a loan modification. Borrowers who qualify for a Home Affordable Modification will never be required to pay a modification fee or pay past due late fees. If there are costs associated with the modification, such as payment of back taxes, your servicer will give you the option of adding them to the amount you owe on your mortgage or paying some or all of the expenses in advance. Paying these expenses in advance will reduce your new monthly payment and save interest costs over the life of your loan.

If you would like assistance from a HUD-approved housing counseling agency or are referred to a counselor as a condition of the modification, you will not be charged a counseling fee. Borrowers should beware of any organization that attempts to charge an upfront fee for housing counseling or modification of a delinquent loan, or any organization that claims to guarantee success.

Is housing counseling required under this program?

Borrowers, especially delinquent borrowers, are strongly encouraged to contact a HUD-approved housing counselor to help them understand all of their financial options and to create a workable budget plan. These services are free. However, housing counseling is only required for borrowers whose total monthly debts are very high in relation their incomes. It is voluntary for other applicants.

When you apply for a Home Affordable Modification, your servicer will analyze your monthly debts, including the amount you will owe on the new mortgage payment after it is modified, as well as payments on a second mortgage, car loans, credit cards or child support. If the sum of all of these recurring monthly expenses is equal to or more than 55% of your gross monthly income, you must agree to participate in housing counseling provided by a HUD-approved housing counselor as a condition of getting the modification.

I heard the government was providing a financial incentive to borrowers. Is that true?

Yes. Borrowers who make timely payments 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. This contribution by the Treasury will help you build equity faster.

I do not live in the house that secures the mortgage I’d like to modify. Is this mortgage eligible for a Home Affordable Modification?

No. For example, if you own a house that you use as a vacation home or that you rent out to tenants, the mortgage on that house is not eligible. If you used to live in the home but you moved out, the mortgage is not eligible. Only the mortgage on your primary residence is eligible. The mortgage servicer will check to see if the dwelling is your primary residence. Misrepresenting your occupancy in order to qualify for this program is a violation of Federal law and may have serious consequences.

I have a mortgage on a duplex. I live in one unit and rent the other. Will I still be eligible?

Yes. Mortgages on two, three and four unit properties are eligible as long as you live in one unit as your primary residence.

I owe more than my house is worth. Will a Home Affordable Modification reduce what I owe?

The primary objective of the Making Home Affordable Program is to help borrowers avoid foreclosure by modifying troubled loans to achieve a payment the borrower can afford. Investors may, but are not required to, offer principal reductions. It is more likely that your servicer will use interest rate reductions in order to make your payment affordable.

I have an FHA loan. Can it be modified under the making Home Affordable Program? Are all loans eligible?

Most conventional loans including prime, subprime and adjustable loans, loans owned by Fannie Mae, Freddie Mac and private lenders and most loans in mortgage backed securities are eligible for a Home Affordable Modification. The Administration is working with the Congress to enact legislation that will allow FHA and VA to offer modifications consistent with Making Home Affordable in the near future. Currently loans insured or guaranteed by these agencies are being modified under other programs that also enable borrowers to retain homeownership.

How do I apply for a modification under the Making Home Affordable Plan?

If you meet the general eligibility criteria for the program, you should gather the financial documentation that your servicer will need to determine if you qualify. Once you have this information, you should call your mortgage servicer and ask to be considered for a Home Affordable Modification. The number is on your monthly mortgage bill or coupon book.

If your loan is current, please be patient as it may take some time before servicers are able to process all applications. However, servicers immediately can begin reviewing the eligibility of borrowers.

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.

If you have already missed one or more mortgage payments and have not yet spoken to your servicer call them immediately.


How long will the Home Affordable Modification Program be available?

The program expires on December 31, 2012. Your trial modification must be in place by that date.

My loan is scheduled for foreclosure soon. What should I do?

Many servicers have made a commitment to postpone foreclosure sales on all mortgages that meet the minimum eligibility criteria for a Home Affordable Modification until those loans can be fully evaluated.

However, borrowers whose loans have been scheduled for foreclosure or any borrower that has missed one or more mortgage payments and has not yet spoken to their servicer should contact the servicer immediately. Borrowers may also contact a HUD-approved housing counselor by calling 1-888-995-HOPE (4673).

Who is my “loan servicer? Is that the same as my lender or investor?

Your loan servicer is the financial institution that collects your monthly mortgage payments and has responsibility for the management and accounting of your loan. Your servicer may also be your lender, which means they own your loan, however, many loans are owned by groups of investors.

Traditionally, banks used money deposited in customers’ savings accounts to make loans. They held the loans, earning the interest as borrowers repaid over time. Banks were thus limited in the number of loans they could make because they had to wait to make new ones until savings deposits grew or existing borrowers repaid their loans. Many families who wanted to own a home were unable to do so because there was not a steady supply of money to lend.

Over time, banks started to turn loans into cash by pooling large groups of loans together to create mortgage backed securities that could be sold to investors such as pension funds and hedge funds. The investors get the right to collect future payments and the bank gets cash that it can use to make more loans. Investors hire loan servicers to collect payments and interact with customers.

If you have questions about your loan or you are behind on your payments you should call your loan servicer at the number on your payment coupon or monthly mortgage statement.

Why does my loan servicer have to ask the investor if they can do a loan modification?

If the organization that services your loan does not own it, your servicer may need to get permission from the owner or investor before they can change any of the terms of your loan. Generally, there is a contract between the servicer and the investor that states what kind of actions the servicer is allowed to take. Most of these contracts, called pooling and servicing agreements (PSAs), give the servicer a lot of leeway to make modification decisions, so long as the modification provides a better financial outcome for the investor than not modifying the loan.

What should I do if my servicer tells me that the investor is not participating in Making Home Affordable?

Borrowers should check first to see if their servicer is listed. If so, you should call your servicer back and ask to speak to a supervisor or you may contact a HUD-approved housing counselor for assistance. If your servicer or investor is not participating in the program, you should ask your servicer or a housing counselor about other workout options that may be available.

 


Understanding the Terms Used in Foreclosure

May 1, 2009

 

If you are working with your lender to keep your home, known as retention, there are several options:

  • Reinstatement: Your lender may agree to let you pay the total amount you are behind, in a lump sum payment and by a specific date. This is often combined with forbearance when you can show that funds from a bonus, tax refund, or other source will become available at a specific time in the future. Be aware that there may be late fees and other costs associated with a reinstatement plan.
  • Forbearance: Your lender may offer a temporary reduction or suspension of your mortgage payments while you get back on your feet. Forbearance is often combined with a reinstatement or a repayment plan to pay off the missed or reduced mortgage payments.
  • Repayment Plan: This is an agreement that gives you a fixed amount of time to repay the amount you are behind by combining a portion of what is past due with your regular monthly payment. At the end of the repayment period you have gradually paid back the amount of your mortgage that was delinquent.
  • Loan Modification: This is a written agreement between you and your mortgage company that permanently changes one or more of the original terms of your note to make the payments more affordable.

If you and your lender agree that you cannot keep your home, there are a number of liquidation terms you should understand:

  • Short Sale: Nothing more than when a lender is willing to accept less than what is owed on outstanding debts against real property. A short sale is a way for a homeowner to avoid foreclosure and still be able to pay off the bank from acceptance or a settlement agreement.
  • Deed-in-lieu of Foreclosure: A cancellation of your mortgage if you voluntarily transfer title of your property to your mortgage company. Usually, you must try to sell your home for its fair market value (FMV) for at least 90 days before a mortgage company will consider this option. A deed-in-lieu of foreclosure may not be an option if there are other liens on the property, such as second mortgages, judgments from creditors, or tax liens.
  • Assumption: An assumption permits a qualified buyer to take over your mortgage debt and make the mortgage payments, even if the mortgage is non-assumable. As a result, you may be able to sell your property and avoid foreclosure.

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