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Help with Loan MOdification Terms (HARP)

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new2q

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Please is anyone familar with how the Loan modification typically works. A friend is getting her mortgage modified but they have not told her the new terms. Bank of America/Green Tree offered a lower mortgage payment and after 3 timely payments have been made the exact modified terms will be disclosed.

I am a commercial banker but not familar with the mortgage loans. The mortgage was lowered from $1100 to $600. With 30 yr rate at 3.5% it seems as though they might be stretching the terms past 30 yrs to offer such low monthly payment

So my question is do they typically forgive any portion of the loan, offer a lower interest rate for a longer period (30-50 yrs).

Thanks. Any info would be great. Folks on CW always have a wealth of information.
 
If they are modifying they are using HAMP not HARP and unfortunately the terms are really up for grabs and often the bank will commit to as little as possible. While principal write off does happen, it is not nearly as common as mortgage extension--I've seen 50 year notes. Your friends should also know that while the terms are up for grabs it is quite possible, even likely, that the bank is reporting them as delinquent, even if they are meeting the terms of the modified agreement because they are not meeting the terms of the original agreement--if modification is really necessary this should not be enough to deter the modifier but the bank will generally not make this clear and it can come as a nasty surprise.

If they are not too far into the modification program or delinquent they might consider refinancing using the HARP program instead. I've seen mortgages come in in the 3s pretty regularly lately and the refinance will not negatively affect their credit.
 
Steve, have you EVER seen anyone get modified without stopping payments/becoming delinquent?

We need a mod but have been turned down 2x

1st time, they said our income was too low to qualify for any modification
2nd time, they said we didn't qualify because the lender would not allow mod without Death, Divorce, Disability or Disaster.
 
Thanks Steve for the response. I had not even heard of the HAMP, will let my friend know of the credit history implications.

Found this online in case anyone else was wondering the difference.

Q. What is the difference between HARP and HAMP ?
A. HARP – The Home Affordable Refinance Program is for people who are current on their mortgage payments but may not have enough equity to qualify for traditional or conventional refinance programs. Most lenders require a loan to value of 90% or less to qualify for a standard refinance program. When you do not have at least 20% equity in your home, meaning that your loan balance is greater than 80% of the value of your home you will be required to carry private mortgage insurance. This PMI – private mortgage insurance can sometimes offset the advantage of refinancing because now you are forced to pay a separate premium that places an insurance on your home loan to protect the lender from default. If your home is upside down in equity and you have decent credit, are employed and can prove your income; then you may qualify for HARP. You will need to check with Fannie Mae or Freddie Mac to make sure your mortgage is owned by either of these two GSE’s Government Sponsored Entities.
HAMP – The Home Affordable Modification Program is for people that have had a hard time making their mortgage payments. They may be late on their mortgage or behind on their payment s for a variety of reasons. The HAMP program is not a refinance. It is a modification of the terms of the mortgage in order to assist the homeowner to get back on track. The HAMP program often requires the home owner to be late on payments and have the ability to demonstrate a hardship. i.e. Unemployment, medical problems, death of spouse, adjustable mortgage payment etc.. The HAMP program was introduced originally to help millions of home owners to keep their home and get back on track. Unfortunately due to large bank incompetence and bureaucratic malaise the HAMP has only served to help about 900,000 people. Recently a new government program was re-introduced called HARP 2 in an effort to help more home owners. One program is for refinance and the other program is for modification.
If you have remained current on your payments, can provide proof of income, and have not had a new loan since 06-01-2009 then the HARP Home Affordable Refinance Program 2.0 may be the right program for you.
 
New2q--I pm'd you.

Reporter--I have, but it's rare. The fact of the matter is that the bank looks at modification as the cheaper alternative to actually foreclosing. Foreclosure is expensive but the banks still do an awful lot of it--one of my clients lost her home just a couple weeks ago. In order for modification to make sense for the bank you have to cross 2 hurdles which seem contradictory. You have to make enough that stringing the mortgage along will eventually be profitable to the bank and you have to make little enough that if the mortgage continues under its current terms the stream of income from the mortgage will simply cease (i.e. you will default and they will be unable to recover the money by selling the property). There may be banks and bank processors out there who really do think about the people involved, but you are generally safer in viewing modification as an attempt by the bank to salvage a bad profit situation--if they feel there is another route which will be more profitable or less loss-laden, whether that path is foreclosure on the one end or refusing to modify on the other, they will take that path. If you are not behind on your mortgage there is very little threat to the bank and thus little reason to change the terms in your favor.

If you are not behind but would have difficulty documenting sufficient income to do a traditional refi, you should check and see if your mortgage is HARP eligible.

I hope it would go without saying but anything I post here is my opinions personally, does not represent my firm in any way, shape or form and is NOT an attempt to personally solicit mortgage business.
 
Steve - what's the best way to get a bank to take a deed-in-lieu? I know that it will crap my credit rating for 3 years (give or take a few years).

I'm current, but so far upside-down/under water I'll be dead before the ratio is back in my favour so selling is an option, but won't happen because of the BS that goes on with a short sale.
 
Canadia--I don't work closely with the department that covers foreclosure and have never had a client offer deed-in-lieu so I am not really proficient on the procedure. You should get better terms that in an actual foreclosure and it is important legally that you state in writing that the offer is voluntary and unsolicited--beyond that, I'm afraid I don't know a great deal.
 
For all of us whose loans are not owned by Fannie/Freddie and therefore not eligible for HARP or HAMP...

This is the order that you have to follow: become delinquent. Bank offers a mod. Don't qualify for mod. Bank offers short sale. Short sale doesn't occur (for whatever reason). Then Deed-In-Lieu is offered. You never, ever pay another dime to the lender during this entire process (theoretically, you are saving that money). You pay your property taxes and hoa and insurance. This process can take many years. A neighbor of ours stayed in their house making no mortgage payment for over 4 years before the bank would take the keys (the owner of their mortgage was Chase). This process is called the Hamster Wheel.

This is with MANY many lenders. This is the process with every single loan held (still held, they hold around 60pct of the loans they originated between 2002-2009) by Wells Fargo, for example.

If you do not qualify for traditional refinancing, check out the loansafe.org forums. Those people REALLY know what they're doing.

THAT SAID - we (DH and me) are current with our mortgage. It is affordable for us. Our house is selling in our neighborhood for about half of what we presently owe. We have 23 years left on our mortgage. While we are indeed upside-down, we do not have any need to move and the thing will be paid off in 23 years so for now, we are sitting with it. If in the future we decide to move, etc, we will decide then. Our thought basically is that while it's mentally distressing to live in a house worth less than we owe, it's all on paper, of the correct size for us, good-ish schools, we can easily afford the payment, and we could not replace the size and livability of our house for what we pay.

So anyway for now, we're staying put. But I have very little against a strategic default. It is a business decision like any other. Everybody's circumstances are different.
 
Fyi, keeping current on hoa or assessments is important, a condo association can and will take possession from the owner much faster (usually < 6 mo) than the foreclosure process usually happens. The association takes possession (not ownership) and attempts to rent the unit to make up back assessments and legal fees.
 
slpeters19 said:
New2q--I pm'd you.

Reporter--I have, but it's rare. The fact of the matter is that the bank looks at modification as the cheaper alternative to actually foreclosing. Foreclosure is expensive but the banks still do an awful lot of it--one of my clients lost her home just a couple weeks ago. In order for modification to make sense for the bank you have to cross 2 hurdles which seem contradictory. You have to make enough that stringing the mortgage along will eventually be profitable to the bank and you have to make little enough that if the mortgage continues under its current terms the stream of income from the mortgage will simply cease (i.e. you will default and they will be unable to recover the money by selling the property). There may be banks and bank processors out there who really do think about the people involved, but you are generally safer in viewing modification as an attempt by the bank to salvage a bad profit situation--if they feel there is another route which will be more profitable or less loss-laden, whether that path is foreclosure on the one end or refusing to modify on the other, they will take that path. If you are not behind on your mortgage there is very little threat to the bank and thus little reason to change the terms in your favor.

If you are not behind but would have difficulty documenting sufficient income to do a traditional refi, you should check and see if your mortgage is HARP eligible.

I hope it would go without saying but anything I post here is my opinions personally, does not represent my firm in any way, shape or form and is NOT an attempt to personally solicit mortgage business.
Click to expand...

Are you or anyone aware of any options for my situation? I am one of those countrywide no doc loan folks and is owned by Fannie Mae. I stupidly put 20% down to get a better rate when they offered my 0% down (80/20) on a no doc. Thing is at the time the computer automatically said ok no appraisal needed with a 58% housing cost/stated no doc income.

I do not have any income coming in currently, have not ever been late, and should have great credit. I figure I am not underwater but likely only 5-12%ish equity. The bit I read about the programs seem to require I actually make 50-100% more (to reach a lower housing cost/income) than I stated originally :faint:. Obviously, if I made that much why the heck would I need a mod. The programs seem to be designed for people who do not really need them.

Any ideas of any programs or help or am I out of luck? Even a reamortization to 50 years or a drop to current rates would help alot.
 
Anyone heard of hardest hit program? https://www.illinoishardesthit.org/

DH lost his job, while applying for unemployment, the ticked the option for more info on this program and someone contacted him about applying. I have not have time to follow up with it, wonder anyone has experience with it?
 
lf5058 said:
Anyone heard of hardest hit program? https://www.illinoishardesthit.org/

DH lost his job, while applying for unemployment, the ticked the option for more info on this program and someone contacted him about applying. I have not have time to follow up with it, wonder anyone has experience with it?
Click to expand...

My understanding on this one is that rather than actually changing the terms of your mortgage this is state assistance in actually paying your mortgage. I don't have direct experience with this one, but I would think it would be worth investigating if temporary hardship is preventing you from making your mortgage payments.
 
lf5058 said:
Anyone heard of hardest hit program? https://www.illinoishardesthit.org/

DH lost his job, while applying for unemployment, the ticked the option for more info on this program and someone contacted him about applying. I have not have time to follow up with it, wonder anyone has experience with it?
Click to expand...

My neighbor just did this and is pushing us to try it (DH lost job in Nov-Hostess). They lowered my neighbor's mortgage by SEVERAL hundred (part of mortgage is paid by govt? or mort co?)...if they stay in their home for 10 years, they will not have to pay back what is assisted to them. It is forgiven. Hardest Hit is supposed to be reliable. I was supposed to call a lady back a few weeks ago and haven't yet...
 
autumnsky said:
My neighbor just did this and is pushing us to try it (DH lost job in Nov-Hostess). They lowered my neighbor's mortgage by SEVERAL hundred (part of mortgage is paid by govt? or mort co?)...if they stay in their home for 10 years, they will not have to pay back what is assisted to them. It is forgiven. Hardest Hit is supposed to be reliable. I was supposed to call a lady back a few weeks ago and haven't yet...
Click to expand...

Any idea do you know if they need to stay 10 more years or 10 years total? Looks like 10 more years, but from your doc link:
"Is the assistance provided by the Illinois Hardest Hit Program a loan?
Yes. Hardest Hit assistance is provided as a 10 year forgivable loan. A lien will be filed against the
property. This assistance is forgiven over the last five years of the 10 year loan term. All borrowers
approved for the program will complete a full set of loan documents. Funds may have to be repaid to
IHDA if you sell your home at a profit or refinance during the 10 year loan term."

Thanks so much, if I sell at a profit in the next 10 years it would be a miracle and then fine pay it back! And it looks likely I might qualify if I can get all the documentation together.
 
DO NOT use IL Hardest Hit if you have an ARM. You are barred from refinancing for 10 years while using Hardest Hit, unless you repay the HH funds.

Caveat emptor!


Loan details from the Illinois Homeowner Program

Borrowers who may be eligible for a loan of up to $25,000. The loan terms will be in the form of a no interest, deferred payment loan that will be secured by the homeowner’s home and equity with a junior lien. The length of loan will have a term of ten years, with the principal amount forgiven monthly over the last five years of the term of the loan. If at anytime the homeowner chooses to either refinance or sell the home within the ten year term of the loan, repayment will be required from the borrower if sufficient net equity proceeds exist to repay the outstanding amount of the loan. (and they decide what is a "reasonable" amount of equity to apply to your home, not what your equity actually is)
 
Bob, you will not qualify, you just said earlier in the thread you have no income. You need to be able to show some ability to pay. This program does not pay your entire mortgage.

Other points:

You must be less than 6 months behind in payments, and must never have been more than 6 months behind.
You must have become unemployed or underemployed within the past 6 months.
You must show a pattern of ability to have afforded this residence PRIOR to having become unemployed.

If you (general You, not just Bob) are considering HH to stay in a bad house for you or a house you can't afford, then you are probably better off simply defaulting. If the house is in an unsafe area, or the house is falling down, you have condo building problems (not enough owners paying into HOA/nonconforming HOA) etc, those problems will not be fixed over the 10 years of help you will receive. At the end of the 10 years, you will still be in your bad situation, only you losing the house or strategically defaulting will be put off for 10 more years. Sometimes is better to rip the bandaid off sooner.

Now if you have a fixed rate mortgage and plan to stay in your house forever and need this help, then this program is a good choice for you.
 
skincarekathy said:
Bob, you will not qualify, you just said earlier in the thread you have no income. You need to be able to show some ability to pay. This program does not pay your entire mortgage.

Other points:

You must be less than 6 months behind in payments, and must never have been more than 6 months behind.
You must have become unemployed or underemployed within the past 6 months.
You must show a pattern of ability to have afforded this residence PRIOR to having become unemployed.

If you (general You, not just Bob) are considering HH to stay in a bad house for you or a house you can't afford, then you are probably better off simply defaulting. If the house is in an unsafe area, or the house is falling down, you have condo building problems (not enough owners paying into HOA/nonconforming HOA) etc, those problems will not be fixed over the 10 years of help you will receive. At the end of the 10 years, you will still be in your bad situation, only you losing the house or strategically defaulting will be put off for 10 more years. Sometimes is better to rip the bandaid off sooner.

Now if you have a fixed rate mortgage and plan to stay in your house forever and need this help, then this program is a good choice for you.
Click to expand...

I have assets I could use for quite awhile pulling out of retirement but they won't count that since its harder for them to grab it?

But my unemployment event was over 6 months ago anyway so this program does not sound like it will work.

My interest rate is quite a bit above current rates around 5.5%, any suggestions other than find a good job and hope they will refinance at a really high income/housing cost ratio?

My problem is that at least originally they included HOA fees in the calculation and they are close to a third of the mortgage/property taxes/assessments total.

I do have to say they seemed like they wanted to hop on the modification thing. One month last year, I technically missed a payment and they started fed exing me modification documents which I figured I did not have enough income. As it turns out I always pay in the grace period and actually must have forgotten to hit the submit button, so they even wiped off the late fee.

I know you say its unusual but do lenders modify since they do not want to have to deal with a foreclosure? Also my high assessment would mean a high carrying cost for them from the day they take over whether that would go into their calculation of maybe modifying the loan?
 
The HOA and taxes and insurance (escrow) are your problem to deal with. Modifying your mortgage will only deal with your principal & interest (P&I). It is effectively impossible to get a mod if you are on an interest-only loan (don't know if you are, but if you are, there it is).

Any loan modification process will require income.

Taking funds from retirement when you are not of retirement age will subject you to taxes at your current rate and a 10pct penalty against what you take out, and doing so is almost always simply draining your retirement savings to only, at best, delay the inevitable.

If you are single with no kids and can live simply in an apartment, you could let your place go and be back to mortgage-ready (at least on your credit rating, income notwithstanding) in 3 years + however long it takes for the home to actually not be yours any more (the duration of the foreclosure).

The "high" on the ratio these days on new files is 31pct spent on housing (that includes escrow items), and for that you must have excellent credit and a hefty down payment. There effectively is no more no-doc or low-doc, you must show an extended ability to pay. W2 income.

You just have to work the numbers. But if you do not have sufficient income to show ability to pay, you will not get a mod. They might pretend to put you through the process but it will ultimately be denied. Then you will be directed to short sale. Then deed-in-lieu. You have to decide whether your residence is affordable to you in the long term (length of the mortgage) and decide based on that whether it makes sense to stay and pay at your current terms, or to let it default now.

I cannot stress enough that throughout the modification/short sale/DIL process it is your responsibility to continue to pay your assessments and property taxes, and you must carry insurance. Those expenses are outside your mortgage, and were escrowed for you only for your convenience in the first place. They were never "included" in your mortgage.
 
Also, if you are not currently paying PMI (private mortgage insurance), and you go into a Fannie or Freddie program, they will require PMI (the cost of which will be included in your monthly payment ratios) if your equity goes below 20pct.
 
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