The similar programs from Fannie Mae and Freddie Mac offer payment reductions and a streamlined application process. It incorporates recommendations from the Federal Housing Finance Agency which oversees the government-sponsored enterprises' safety and soundness , HUD and industry stakeholders, including the Mortgage Bankers Association. We hope that other government insurers and guarantors use 'Flex Modification' as a starting point as they think about their own loss mitigation procedures so that HAMP is eventually replaced by a streamlined, universal loan mod product.
By avoiding the high costs associated with foreclosures, the Flex Modification will result in significant savings for the Enterprises and taxpayers. And it will provide borrowers who face permanent hardships with a sustainable modification. It laid out five factors--accessibility, affordability, accountability, sustainability and transparency--that should form the foundation of future loss mitigation programs. It provides the greatest amount of assistance to those areas in need.
The new modification would replace the current Fannie Mae and Freddie Standard and Streamlined Modification offerings on and after October 1, In the interim, servicers must continue to evaluate borrowers for Standard and Streamlined Modifications following the evaluation hierarchy. The program offers at least a 20 percent payment reduction for eligible borrowers while minimizing the excessive documentation requirements that have caused hardship for HAMP applicants.
Form , Uniform Borrower Assistance Form, and . principal is payable upon maturity of the loan modification, sale or transfer of the property. The Freddie Mac Flex Modification® (Flex Modification) offers Servicers an easier , flexible way of helping more borrowers qualify for a loan modification in a.
In a loan modification, applicants attempt to alter one or more of these variables to reduce their payments. Principal reduction: We begin with the holy grail of loan modifications — eliminating a portion of your original debt and recalculating your payments based on this new figure. Because the result is a direct hit to their bottom line, lenders are reluctant to saw off a portion of the principal; they much prefer to restructure troubled loans in other ways. If you are approved for a principal reduction, however, consult with a tax professional; the forgiven portion of your loan may be subject to income taxes as regular income.
Lower interest rate: Your lender might be willing to negotiate a break on your interest rate.
In some cases, a quarter or even an eighth of a point can make all the difference. Extended term: Lenders sometimes are willing to recalculate a loan based on a longer payoff schedule.
A year loan can stretch to 20 or Be wary, however, of lenders offering to extend loans beyond 30 years; if the plan is to lengthen your mortgage to 40 years or more, scrutinize the modification for prepayment penalties. Refinance the loan: Modification generally is for borrowers who are in trouble on their mortgages and unable to refinance. However, under certain circumstances — the house has plenty of equity, or the borrower has untapped resources — even a problem borrower can refinance.
Replacing your current loan for one with a lower interest rate, a longer term, or both, could drop your monthly payment substantially. The downside: There will be closing costs, and — assuming you stay put for the duration of the loan — you probably will incur higher total interest costs. Loan modifications, by contrast, can be completed faster and without processing fees. Postpone payments: Suppose your financial bind is temporary.
Homeowners who have fallen behind on their payments, or are in danger of falling behind, and are faced with potential foreclosure as a result of unanticipated or unavoidable and demonstrable financial hardship may be candidates for loan modifications. If nothing else, the Great Recession and mortgage crisis made lenders and mortgage-servicing companies more attuned to the needs of at-risk homeowners.
Nowadays, most lenders have assorted programs designed to see borrowers through tough times while keeping them in their homes. Two federal programs adopted in response to the mortgage crisis are no longer with us.
But substitutes are in place. Borrowers whose mortgages are subject to Fannie or Freddie may qualify.
HARP expired at the end of Explain your situation and inquire about the available options. Other factors being equal, lenders are more likely to work with at-risk clients who are proactive about their predicament. Most likely, you will be asked to provide proof of your financial hardship; some will require a letter explaining your hardship and why a modification is necessary.
Standard Mortgage Modification Only homeowners with mortgages owned by Freddie Mac are eligible for its modification programs. Many US homeowners have been struggling to keep their homes in the face of dire economic circumstances and possible foreclosure. FreddieMac does not provide any direct lending services. Laws vary by state. VA 30 Yr. Please help us keep our site clean and safe by following our posting guidelines , and avoid disclosing personal or sensitive information such as bank account or phone numbers. Fact Sheets.
Just like a mortgage application, a loan modification application can take hours to complete. Also, your lender is likely to be extremely particular about how it wants information formatted. Once everything is submitted, make certain you keep your information updated, with replacement documents in timely order. A common complaint among loan modification applicants is that lenders ask for the same document over and over, most often because the original documents have gone out of date.
It may take weeks before the lender provides an answer, and weeks more to alter your loan, if you get approved. A majority of applications are denied.