Loan Mod info

[vanessa26]

I have been reading all the great info. on here and thank you! I have asked for a loan mod since Oct. of 08'. I called many times and after calling the number posted on here I finally started getting some help. I spoke with sooo many different reps, well after so much frustration I finally got my papers sent for the loan modification and believe me I had sleepless night, hours and days on the phone with NO HELP what so ever about to face foreclosure many times. I went through the 3month trial.

We currently owe $203,000.00 with and interest rate of 5.5% variable so our payment is $1,400. Well we had an income change and so forth became behind $14,000.00 the value of the houses here are worth about 50k!! Our offer was to include the past due amount owed so our principal balance would be $215,000. with and interest rate of 3.5% the payment would be $1,271.42 the following yr the interest would go up to 4.5% as well as the payment.. the the third yr it would be 5.5% for the rest of the loan.

I called back and asked if we did not qualify for the obama plan which I believe is 31% of the income. I was told they had not done an appraisel for our home so it would take 2 weeks and they would consider it. I also found out we have fannie loan.

I really don't know what to do because the houses are NOT worth 215k around here the area is not nice at all but we can't buy another home our credit is ruined we are going to file for bankruptcy. Should we keep a home that is not worth it?? Also has anyone had a modified loan where they lower the principal amount??

[Moe Bedard]

vanessa26,


Welcome to the forum and thank you for joining...................


The servicer will be following a set of steps and guidelines to get the payment on the first lien alone including principal, interest, taxes and homeowner's insurance to the 31% of your gross income. Home Affordable Modifications are designed to prevent foreclosures by making mortgage payments affordable for working homeowners struggling to retain homeownership. The plan is not intended to replace equity lost by home price depreciation.


Here are the steps they follow in order........................

Step 1a: Request Monthly Gross Income as specified above.

Step 1b: Validate total first lien debt and monthly payments (PITIA). For purposes of making a provisional modification offer during the trial modification period, the borrower’s unverified income and debt payments can be used. Provisional information and modification terms will be verified in a timely manner.

Step 2: Capitalize arrearage. Servicers may capitalize accrued interest, past due real estate taxes and insurance premiums, delinquency charges paid to third parties in the ordinary course of servicing and not retained by the servicer, any required escrow advances already paid by the servicer and any required escrow advances by the servicer that are currently due and will be paid by the servicer during the Trial Period. Late fees are not capitalized.

Step 3: Target a Front-End DTI of 31%. The lender/investor shall follow steps 4, 5, and 6 to reduce the borrower’s payment to the level corresponding to the Front-End DTI Target.

Step 4: Reduce the interest rate to reach the Front-End DTI Target (subject to a floor of 2%). The note rate should be reduced in increments of 0.125 %, and should bring the monthly payment as close as possible to the Front-End DTI Target without going below 31%. If the resulting modified interest rate is at or above the Interest Rate Cap, this modified interest rate will be the new note rate for the remaining loan term. If the resulting modified interest rate is below the Interest Rate Cap, this modified interest rate will be in effect for the first five years, followed by annual increases of 1% (100 basis points) per year or such lesser amount as may be needed until the interest rate reaches the Interest Rate Cap, at which time it will be fixed for the remaining loan term.

Step 5: If the Front-End DTI Target has not been reached, extend the term of the loan up to 40 years. If term extension is not permitted extend amortization. The 40-year term begins at the start of the modification (after the borrower successfully completes the Trial Period). Note that the servicer should only extend to a term that is necessary to reach the Front-End DTI Target; there is no requirement to extend to a 40-year term.

Step 6: If the Front-End DTI Target has not been reached, forbear principal. If there is a principal forbearance amount, a balloon payment of that forbearance amount is due on the maturity date, upon sale of the property, or upon payoff of the interest bearing balance. If the modification does not pass the NPV Test and the servicer chooses to modify the loan, the modified balance must be no lower than the current property value.



FannieMae will not do principal reductions................