How low can they go?

[Tussin]

So, after 4 months of utter BS and repeatedly sending the same document in (and also being notified that I received a loan modification but really did not), I got the "not eligible" letter. The reason is:

"You are not eligible for a Home Affordable Modification because we are unable to create an affordable payment equal to 31% of your reported monthly gross income without changing the terms of your loan beyond the requirements of the program. In other words, to create an affordable payment for you, the investor (owner) of your loan would be required to delay collecting too large a portion of your principal balance until the loan pays off, beyond what the Home Affordable Modification Program allows."

Here are my questions. Firstly, I am in North Carolina. If my mortgage is $3,000, what is the lowest they would be able to reduce my payment using the HAMP program? Is there somewhere where I can find this out? My reason is because I want to appeal the decision due to a change in my financial situation. It has recently increased, and I feel that I may now be eligible, however I do not want to go through the process unless I know that I would be. Therefore, by knowing how much they are able to cut off of my mortgage, I can calculate where my gross income should be.

Secondly, the banks are under a lot of scrutiny, we know, but is there a main complaint line to send documentation to, such as the documentation I was sent stating that I got a modification, but in turn, really did not? It was quite the misrepresentation.

Thank you all in advance.

[Cat Damiano]

Hi Tussin,


For HAMP in order to ge to the 31 percent they use a series of waterfall steps. The max they can forbear of principal balance is 30 percent. If the borrower’s monthly mortgage payment cannot be reduced to the target monthly mortgagepayment ratio of 31 percent unless the servicer forbears more than the amount described above,the servicer may consider the borrower ineligible for a HAMP modification.
Here are the steps taken;

Step 1: Capitalization In the first step, the servicer capitalizes accrued interest, out-of-pocket escrow advances to third parties, and any required escrow advances that will be paid to third parties by the servicer during the TPP. Step 2: Interest Rate Reduction In the second step, the servicer reduces the starting interest rate in increments of 0.125 percent to get as close as possible to the target monthly mortgage payment ratio. The interest rate floor is 2.0 percent. The initial interest rate would be fixed for the first five years then increase by 1 percent in year 6 and another 1 percent in year 7. For the remainder of the term the rate will be fixed at the prime market rate at the inception of the permanent loan modification. Step 3: Term Extension If necessary, in the third step the servicer extends the term and re-amortizes the mortgage loan by up to 480 months from the Modification Effective Date to achieve the target monthly mortgage payment ratio. Step 4: Principal Forbearance If necessary, the servicer will provide for principal forbearance to achieve the target monthly mortgage payment ratio. The principal forbearance amount is non-interest bearing and non-amortizing. The amount of principal forbearance will result in a balloon payment fully due and payable upon the earliest of the borrower’s transfer of the property, payoff of the interest bearing UPB, or at maturity of the mortgage loan. There is no requirement to forgive principal under HAMP.