More About Making Home Affordable
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.