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Do I qualify for a mortgage modification?


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9/14/2015
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What is a mortgage loan modification?

A mortgage modification is a change in the terms of an existing loan.  Your loan terms include your principal balance, term, and interest rate.  If you are behind on your payments you have accumulated arrears.  These delinquent payments can be handled a number of ways when a loan modification is offered.  Most frequently, these will be added to the principal balance.  This is called “capitalizing and extending” the existing loan.

Is there a “quick and dirty” way to see if I qualify for a loan modification with a principal reduction?

Go to this helpful website -- https://www.armdisarm.com/UnofficialHAMPCalculator/

Can I get a lower payment by getting a mortgage loan modification?

What documents do I need to assemble to be considered for a mortgage loan modification?

My property has declined in value.  My loan balance is much higher than what the home is worth.  Will the bank take the fact my loan is ‘under water’ into account in evaluating my loan modification application?

No.  In most cases your mortgage loan modification will be based on the accrued principal balance.  Most loans that were originated with a large bank, but which have now been sold, are with ‘investors’ that have strict restrictions that prevent them from reducing the principal and interest payments on the loan.

If you have a loan with Wells Fargo, JP Morgan Chase, Bank of America, CitiGroup, US Bankcorp, PHH Mortgage, PennyMac, Flagstar Bancorp, or Nationstar, then your loan is likely still held by the ‘originating lender.’  Check your original mortgage and note to confirm the original lender is still hodling the loan.  In these cases it is much more likely that they will defer or reduce the principal balance on your loan in offering a modification.  This is called principal reduction or principal deferral, and is normally highly frowned upon by banking institutions.  They only provide this relief if public subsidies are available or where they have an in-house program for loss mitigation that includes taking these actions for select loans that fall into rigid criteria.

So, When will the fact my loan is ‘under water’ be taken into account?

The fact your loan is ‘under water’ will be taken into account when the lender can receive federal subsidies for doing so or where they have their own program for principal reduction or principal deferral.  The primary programs that will do this are HAMP Tier 1 and HAMP Tier 2.

For example, Nationstar participates in the Home Affordable Modification Program (“HAMP”).  Let’s say you qualify for HAMP Tier 1 consideration.  Your mortgage loan on your one-unit owner-occupied property was originated before Jan. 1, 2009, your unpaid principal balance (beore capitalization) is currently less than $729,750, and your loan isn’t owned, guaranteed or insured by Fannie Mae, Freddie Mac, FHA, VA, or USDA.  You’ve sent in all the documents the bank needed to evaluate you (Hardship Letter, 2 months paystubs, list of recurring expenses—signed & dated, copies of 2 years W-2s, 2 years Tax Returns, 2 months bank statements, gas and electric bills, RMA, 4506-T, and Dodd Frank Cert.).  Nationstar has determined you qualify.  What happens now?

Nationstar will give you a Trial Period Plan (“TPP”).  You will need to make three (3) months of payments of the modified mortgage payment amount.

Next, Nationstar will send you a series of documents called a Permant Home Approval Modification Agreement.  If you qualify for principal deferral, the terms of deferral will be stated in Section 3 of the Agreement.  The paragraph will tell you that you won’t make principal or interest payments on the deferred amount, and in some cases that this amount will be retired, reduced or forgiven over three years.  The paragraph might read as follows:

*$38,815 of the New Principal Balance shall be deferred (the “Deferred Principal Balance”) and will be treates as a non-interest bearing principal forbearance.  I will not pay interest or make monthly payments on the Deferred Principal Balance.  In addition, $38,815 of the Deferred Principal Balance is eligibile for forgiveness (the “Deferred Pincipal Reduction Amount”).  Provided I am not in default on my new payments such that the equivalent of three full monthly payments are dude and unpaid on the last day of any month, on each of the first, second and third anniversaries of June 1, 2015, the Lender shall reduce the Deferred Principal Balance of my Note in installments equal to one-third of the Deferred Principal Reduction Amount.  Application of the Deferred Principal Reduction Amount will not result in a new payment schedule.  The New Principal Balance less the Deferred Principal Balance shall be referred to as the “Interest Bearing Principal Balance” and this amount is $320,850.  Interest at the rate of 2.750% will begin to accrue on the Interest Bearing Principal Balance as of September 1, 2015 and the first new monthly payment on the Interest Bearing Principal Balance will be due on October 1, 2015.  My payment schedule for the Modified Loan is as follows:

Wht federal subsidy or principal reduction/deferral plans are available to homeowners?

Who decides whether my loan modification will go through and what the terms will be?

I received a previous loan modification through HAMP.  How many loan modifications am I eligible for?

Once you receive a HAMP Tier 1 loan modification, you are not eligible for another HAMP Tier 1 loan modification.  With HAMP Tier 2 loan modifications, you are eligible for up to three different loan modifications.

For more information about applying for a second HAMP loan modification, read this helpful article: http://www.nolo.com/legal-encyclopedia/if-i-default-under-hamp-can-i-reapply.html

For more about HAMP Tier 2, read this helpful article: http://www.huffingtonpost.com/anna-cuevas/hamp-tier-2-mortgage-loan_b_1578415.html

Can I get a modification if my home is not my principal residence?

You are still eligible for HAMP Tier 2 and other in-house programs, and can still qualify for a loan modification even if the house is not owner-occupied.

Why would a bank give me a modification?

Can I qualify…

            If I have a low credit score?

            If I am current on my mortgage?

            If I am in bankruptcy?

            If I’ve received a foreclosure notice?

            If I’ve received a foreclosure Complaint?

            If it is a vacation or investment property?

How long does a typical loan modification take?

What special help is available if I have an FHA, VA or Conventional Loan?

Can I get a loan modification for my second mortgage?



Category: Foreclosure Law

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