Home Affordable Modifications Program
Do Not Lose Your Home To Foreclosure
Modifications program offers help to borrowers who are struggling to
keep their loans current or who are already behind on their mortgage
payments even if the loan is not owned or securitized by Fannie Mae or
Freddie Mac. 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.
To apply for a Home Affordable Modification, you must:
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.
homeowner does not need to be behind on mortgage payments to be eligible
for a Home Affordable Modification. 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.
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.
with second mortgages are still eligible, but only the first mortgage is
eligible for a modification.
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 US government website: http://www.makinghomeaffordable.gov
If you report a hardship, your servicer
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.
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.
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.
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
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:
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. Remember, in principal forbearance the loan amount is only
deferred and not forgiven.
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.
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.
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.
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 to their incomes. It is voluntary
for other applicants.
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
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.
you don not live in the house that secures the mortgage that you would
like to modify, that mortgage is not eligible for a Home Affordable
Modification. 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.
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.
borrowers that have a mortgage on a duplex, where the borrower lives in
one unit and rents the other, that mortgage is still eligible for a Home
Affordable Modification. Mortgages on two, three and four unit properties
are eligible as long as you live in one unit as your primary residence.
you owe more than your house is worth, a Home Affordable Modification may
not reduce the actual amount of what you 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.
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.
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 aHome Affordable
Modification. The number is on your monthly mortgage bill or coupon book.
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. You can
get more information about
have already missed one or more mortgage payments and have not yet spoken
to your servicer call them immediately.
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:
program expires on December 31, 2012. Your trial modification must be in
place by that date.
you are facing an imminent foreclosure, you need to understand the
provisions of the Home Affordable Modification program and realize that
there may still be options available to you. 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.
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).
can get more information about
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.
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.
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.
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.
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.
your servicer informs you that the investor or lender for your mortgage is
not participating in Making Home Affordable program, you should first
review the list of participants to verify this information. As contracts
with servicers and investors are signed, the list of participants will be
posted at http://www.makinghomeaffordable.gov/.
If your investor or lender is listed, 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.
Foreclosure rescue scams – beware, beware
BEWARE OF FORECLOSURE RESCUE SCAMS – HELP IS FREE!
the following helpful tips in mind:
should never be a fee for assistance with or information about any aspects
of the Making Home Affordable Program. It is a US government program and
the government is not charging any fees for this program.
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!
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.
make your mortgage payments to anyone other than your mortgage company
without their approval.