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Frequently Asked Questions

The Home Affordability Plan

Can Making Home Affordable help me if my loan is not owned or securitized by Fannie Mae or Freddie Mac?

Yes. Borrowers who are already behind on their mortgage payments or who are struggling to keep their loans current. 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, and have an unpaid principal balance that is equal to or less than $729,750 (for one unit properties and higher for two to four unit properties (consult your servicer),

Have a loan that was originated 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 no longer affordable, perhaps because of a significant change in income or expenses.

If you answered YES to all of these questions, you are eligible to apply for a Home Affordable Modification. Only your servicer will be able to tell you if you qualify.

What if I don't qualify or my lender is not participating in the Home Affordable Modification Program?

While 3-4 Million Homeowners are expected to qualify and most major lenders are expected to participate, in the event you cannot participate in this program, we are an ethical, full service Loss Mitigation firm dedicated to helping homeowners retain their homes. Contact us today at 1-877-467-3588.

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 they have had or will soon have a significant increase in their mortgage payment that they cannot afford. If you have had or anticipate a significant increase in your mortgage payment or have had a significant reduction in income, contact your servicer. If you meet the minimum eligibility criteria for a Home Affordable Modification, your servicer is required to evaluate your loan to see if you are at risk of imminent default.

I have missed some mortgage payments am I eligible?

If you answered yes to the questions above, have missed two or more mortgage payments and your servicer is participating in the Making Home Affordable Program, your servicer must evaluate your loan to determine if you qualify for a modification.

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.FinancialStability.gov. Participation will be mandatory for any servicer that accepts future funding from the Treasury’s Financial Stability Program.

What will my servicer do to determine if I qualify?

Your servicer will:

• Determine that your loan meets the minimum eligibility criteria (owner occupied, originated before January 1, 2009, UPB equal to or less than $729,750). If yes:
  

• Obtain sufficient income information to determine if your monthly mortgage payment is more than 31% (approximately 1/3) of your gross or pre-tax monthly income. (Your servicer may initially accept verbal information about your income, but eventually you will need to provide proof of income in the form of tax returns and pay stubs). 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 mortgage payment down to a point where it is about 31% of your gross monthly income.
  

• Apply a test to determine if the cost of the modification (including the government’s incentive payments) is less costly for the investor than a foreclosure. If yes:
  

• Put you on a trial modification for three months at the new interest rate and payment.

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.

The modification payment will also 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 was not escrowed.

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, the modified rate will be fixed for the life of the loan.

How low can my interest rate go?

Treasury is providing incentives to your investor to write the interest down 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 is does not result in a payment that is affordable (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 will 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.

Making Home Affordable will offer assistance to as many as 7 to 9 million homeowners, making their mortgages more affordable and helping to prevent the destructive impact of foreclosures on families, communities and the national economy.

The Home Affordable Refinance program will be available to 4 to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac. Normally, these borrowers would be unable to refinance because their homes have lost value, pushing their current loan-to-value ratios above 80%. Under the Home Affordable Refinance program, many of them will now be eligible to refinance their loan to take advantage of today’s lower mortgage rates or to refinance an adjustable-rate mortgage into a more stable mortgage, such as a 30-year fixed rate loan.

GSE lenders and servicers already have much of the borrower’s information on file, so documentation requirements are not likely to be burdensome. In addition, in some cases an appraisal will not be necessary. This flexibility will make the refinance quicker and less costly for both borrowers and lenders. The Home Affordable Refinance program ends in June 2010.

The Home Affordable Modification program will help up to 3 to 4 million at-risk homeowners avoid foreclosure by reducing monthly mortgage payments. Working with the banking and credit union regulators, the FHA, the VA, the USDA and the Federal Housing Finance Agency, the Treasury Department today announced program guidelines that are expected to become standard industry practice in pursuing affordable and sustainable mortgage modifications. This program will work in tandem with an expanded and improved Hope for Homeowners program.

With the information now available, servicers can begin immediately to modify eligible mortgages under the Modification program so that at-risk borrowers can better afford their payments. The detailed guidelines (separate document) provide information on the following:

Eligibility and Verification

Loans originated on or before January 1, 2009.

First-lien loans on owner-occupied properties with unpaid principal balance up to $729,750. Higher limits allowed for owner-occupied properties with 2-4 units.

All borrowers must fully document income, including signed IRS 4506-T, two most recent pay stubs, and most recent tax return, and must sign an affidavit of financial hardship.

Property owner occupancy status will be verified through borrower credit report and other documentation; no investor-owned, vacant, or condemned properties.

Incentives to lenders and servicers to modify at risk borrowers who have not yet missed payments when the servicer determines that the borrower is at imminent risk of default.

Modifications can start from now until December 31, 2012; loans can be modified only once under the program.

Loan Modification Terms and Procedures

Participating servicers are required to service all eligible loans under the rules of the program unless explicitly prohibited by contract; servicers are required to use reasonable efforts to obtain waivers of limits on participation.

Participating loan servicers will be required to use a net present value (NPV) test on each loan that is at risk of imminent default or at least 60 days delinquent. The NPV test will compare the net present value of cash flows with modification and without modification. If the test is positive, meaning that the net present value of expected cash flow is greater in the modification scenario, the servicer must modify absent fraud or a contract prohibition.

Parameters of the NPV test are spelled out in the guidelines, including acceptable discount rates, property valuation methodologies, home price appreciation assumptions, foreclosure costs and timelines, and borrower cure and re default rate assumptions.

Servicers will follow a specified sequence of steps in order to reduce the monthly payment to no more than 31% of gross monthly income (DTI).

The modification sequence requires first reducing the interest rate (subject to a rate floor of 2%), then if necessary extending the term or amortization of the loan up to a maximum of 40 years, and then if necessary forbearing principal. Principal forgiveness or a Hope for Homeowners refinancing are acceptable alternatives.

The monthly payment includes principal, interest, taxes, insurance, flood insurance, homeowner’s association and/or condominium fees. Monthly income includes wages, salary, overtime, fees, commissions, tips, social security, pensions, and all other income.

Servicers must enter into the program agreements with Treasury's financial agent on or before December 31, 2009.

Payments to Servicers, Lenders, and Responsible Borrowers

The program will share with the lender/investor the cost of reductions in monthly payments from 38% DTI to 31% DTI.

Servicers that modify loans according to the guidelines will receive an up-front fee of $1,000 for each modification, plus “pay for success” fees on still-performing loans of $1,000 per year.

Homeowners who make their payments on time are eligible for up to $1,000 of principal reduction payments each year for up to five years.

The program will provide one-time bonus incentive payments of $1,500 to lender/investors and $500 to servicers for modifications made while a borrower is still current on mortgage payments.

The program will include incentives for extinguishing second liens on loans modified under this program.

No payments will be made under the program to the lender/investor, servicer, or borrower unless and until the servicer has first entered into the program agreements with Treasury’s financial agent.

Similar incentives will be paid for Hope for Homeowner refinances.

Transparency and Accountability

Measures to prevent and detect fraud, such as documentation and audit requirements, will be central to the program.

Servicers will be required to collect, maintain and transmit records for verification and compliance review, including borrower eligibility, underwriting, incentive payments, property verification, and other documentation.

Freddie Mac will audit compliance.