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.
How do I know if I qualify for a Home Affordable
Modification?
To apply for a Home Affordable Modification, you must:
. Be an owner-occupant in a one to four unit
property,
. Have an unpaid principal balance that is equal to or
less than $729,750 for one unit properties (there is a
higher limit for two to four unit properties - consult your
servicer),
. Have a loan that was originated on or before
January 1, 2009,
. Have a mortgage payment (including taxes,
insurance, and home owners association dues) that is
more than 31% of your gross (pre-tax) monthly income,
and
. Have a mortgage payment that is not affordable,
perhaps because of a significant change in income or
expenses.
If you answered YES to all of these questions, you may
be eligible to apply for a Home Affordable Modification.
Only your servicer will be able to tell you if you qualify.
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.
As contracts are signed, a list of participating servicers
will be available on the Internet at www.
makinghomeaffordable.gov.
What will my servicer do to determine if I qualify?
If you report a hardship, your servicer will:
• Determine whether your loan meets the minimum
eligibility criteria (owner occupied, originated on or before
January 1, 2009, unpaid principal balance equal to or less
than $729,750). If yes
Ask about current income, assets and expenses as well
as the specific circumstances relating to the hardship to
determine if you will be unable to make your mortgage
payment. (Your servicer may initially accept verbal
information about your income and expenses, but
eventually you will need to provide proof in the form of
tax returns, pay stubs and other evidence).
Determine if your monthly first lien mortgage payment is
more than 31% (approximately 1/3) of your gross or pre-
tax monthly income. If yes:
Add past due charges (interest, taxes, insurance and
costs that your lender paid to other parties on your
behalf – but not late fees, those must be waived) to the
loan balance.
Determine how much of an interest rate reduction will be
required to get your first mortgage payment down to a
point where it is no more than 31% of your gross
monthly income.
Apply a value test to determine if the cost of the
modification (including the government’s incentive
payments) is less costly for the investor than not
modifying the loan (loans held by borrowers who have a
lot of equity or whose incomes are very low in relation to
the value of their homes probably will not pass this value
test). If yes:
Put you on a trial modification for three months at the
new interest rate and payment level.
If you successfully make the payments and are current at
the end of the trial period, your servicer will execute a
permanent modification agreement that will lower your
interest rate to a fixed rate for five years, and then
capped at a low rate for the remaining life of the loan.
NOTE: You will be required to sign the modification
agreement and other documents and attest that all of
the information you provided to your servicer was true
and accurate. Misrepresenting any information required
for the Home Affordable Modification is a violation of
Federal Law and has serious consequences.
ke your mortgage payments to anyone other than your
mortgage company without their approval.
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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.
What information and documents will I need?
It will help your servicer and speed processing of your application if you gather some information and
documents before you call. For all borrowers on your loan, you will need:
. Information about monthly gross income, including recent pay stubs if the borrowers are salaried and
receive them and documentation of any income received from other sources.
. Most recent income tax return.
. Information about assets.
. Information about any second mortgage on the house.
. Account balances and minimum monthly payments due on all credit cards.
. Account balances and monthly payments on all other debts such as student loans and car loans.
. A letter describing why your mortgage is unaffordable (i.e. what caused your income(s) to be reduced or
expenses to be increased).
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).
WHAT ELSE DO I NEED TO KNOW?
1. 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.
2. 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.
3. What should I do if my servicer tells me that the investor is not participating in Making Home Affordable?
As contracts with servicers and investors are signed, the list of participants will be posted at http://www.
makinghomeaffordable.gov/. 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.
BEWARE OF FORECLOSURE RESCUE SCAMS – HELP IS FREE!
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. There should never be a fee for assistance with or information about the Making Home Affordable
Program.
. Beware of any person or organization that asks you to pay an upfront fee in exchange for a counseling
service or modification of a delinquent loan. Do not pay – walk away!
. Beware of anyone who says they can “save” your home if you sign or transfer over the deed to your
house. Do not sign over the deed to your property to any organization or individual unless you are working
directly with your mortgage company to forgive your debt.
. Never ma