Jean's Blog

More About Making Home Affordable

Posted by Jean

On my post about the Making Home Affordable loan modifications, CMPIPE commented: ”This site tells you if you may qualify, however, the mortgage lender can chose to not allow the modification – correct?”

Yes, that is correct. The site outlines the stipulations to make you eligible to apply for a loan modification from your lender; however, the program is voluntary and there is a chance your servicer isn’t participating (many are, though – and there are financial incentives for them to do so. You can find a frequently-updated list of servicers who have signed on here.)

If your servicer is participating, they will then put your loan through a series of tests to determine if you qualify. This includes:

Determining whether your loan is eligible (owner occupied, originated on or before January 1, 2009, unpaid principal balance equal to or less than $729,750).

Asking about your current income, assets and expenses as well as why you are unable to make your current mortgage payment (you’ll need to provide proof – tax returns, pay stubs).

Determining if your monthly mortgage payment is more than 31% of your monthly take home pay.

Adding past due charges (interest, but not late fees) to the loan balance.

Calculating how much they would need to reduce your interest rate in order to get your mortgage payment to under 31% of your monthly take home pay

Seeing if the cost of the modification (including the government’s incentive payments to the servicer) is less costly for the investor than not modifying the loan (Note: If you have a lot of equity or your income is very low compared to the value of your home, you will likely not pass this test)

Putting you on a modification for a three-month trial at the new payment amount to see if you can make the payments. If you are successful, you’ll receive a permanent modification agreement that will lower your interest rate to a fixed rate for five years, and then cap it at a low rate for the remainder of the loan.