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:::images-3.jpegFHFA Loan Modification

The FHFA (Federal Housing Finance Agency) Loan Modification model was borrowed from the recent success of the Federal Deposit Insurance Corporation’s (FDIC’s) loan modification standards.  These were established for IndyMac Bank customers (now IndyMac Federal Bank) after the FDIC took over the bank.

The goal of this new government program is to provide a “Streamlined Modification Plan” (SMP) for homeowners that are 90 days or more delinquent on their mortgages and have the ability to make more affordable mortgage payments.  This program will help homeowners who’s loans are held by Fannie Mae or Freddie Mac avoid preventable foreclosures by restructuring the terms of their mortgages.  New mortgage terms will include extending the length of the mortgage up to 40 years, deferring part of the principal, lowering the interest rate, and forbearing past due interest.

Under this plan, mortgage servicers will work with borrowers to reduce monthly payments to 38% of their gross income, a standard threshold of affordability established by the FDIC program.  This threshold includes all of the borrowing housing costs including taxes, insurance, and HOA fees.

Here is an example of how an FHFA Loan Modification may be structured with the interest rate, and monthly payments modified as follows:

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Qualification and Program Guidelines
The FHFA Loan Modification will only offer 30-year fixed rate mortgages – so with exception to the initial reduced interest rates, the payments will not change.  In addition, this program will require that the modified terms be based on a family’s long-term ability to repay the mortgage.
 
Here are the basic qualification guidelines for FHFA Loan Modification as we understand them thus far.  If you are unsure of how to interpret these, please use our online service and you will receive your qualification results via e-mail HERE.

  • FHFA Loan Modification is voluntary.  Both lender(s) and borrower(s) must agree to participate.
  • You must qualify for the modified terms by verifying your income.  This is done with bank statements, tax return transcripts and your two most current pay stubs.
  • You must make all of your modified mortgage payments on time.

Frequently Asked Questions

Where Do I apply for FHFA Loan Modification?  The first place to start is to contact your lender / servicer to find out if they will be participating in the new FHFA program.  Since this program will be new for almost all lenders, you are likely to get very little information initially.  You should check back with your lender periodically as the program gains speed.  If you want to get a head start on the process, we are advising our clients to begin the standard Loan Modification process as a prelude to the program.  You may do this on your own by contacting your loan servicing company, or utilize a third party service such as helpUmodify.org

I contacted my lender and they are not participating in this program.  Can I apply with another lender?  No, this program can only be initiated through your current lender / servicer.  If they are not offering this program, you should seek other workout remedies.  Please contact us for assistance.

My lender has started foreclosure proceedings.  Can I still apply for FHFA Loan Modification?  Yes, however, time is of the essence and since this program is just in it’s infancy stage, if your lender is not yet participating you should seek an alternative workout remedy ASAP.

I recently filed for bankruptcy.  Am I still able to apply for the FHFA Loan Modification?  No, you cannot have filed for bankruptcy prior to completion of the modification.

I started a Loan Modification with my lender, can I still qualify for the FHFA Loan Modification?  Yes, in fact your lender may recommend the FHFA program as there are incentives for your lender / servicer to participate in the program.  Keep working towards your loan modification and talk to your lender about moving to the FHFA program as soon as it becomes available to them.

I have a first and second mortgage on my home.  Can I still apply for the FHFA Loan Modification?  Yes, however, you will need to go through the modification process separately with both lenders / servicers.


Do-it-Yourself TIP #1

Before contacting your lender to discuss your situation, be prepared to provide them with your family budget.  This includes all of you income and expense in your household.  Your lender will ask you for this information as a means of qualifying you for one of their standard workout solutions.  Be as accurate as you can as overestimating your income or your expenses may cost you an approval.


Do-it-Yourself TIP #2

When communicating with your lender, clearly express your desire and intentions to keep the home.  Do not threaten to walk away from the home.  Lenders want to work with homeowners who truly desire to stay in their homes and are willing to work through their challenges.


Do-it-Yourself TIP #3

While exploring workout solutions with your lender, keep up on your payments as best you can.  Contrary to what you are hearing out there, purposefully withholding mortgage payments as a means of negotiating is bad advice and can cost you the ability to obtain a better mortgage as conditions in the mortgage market improve and other workout solutions become available.


Do-it-Yourself TIP #4

Prepare yourself for a long drawn out fight with your lender, perhaps the fight of your life.  You can expect the process to take upwards of 120 days and possibly having to start over once or twice to achieve the desired results.  Make your workout solution a part time job and dedicate 2 to 3 hours a week doing research and contacting your lender(s).