31 percent rule - Loan Modification Forum

amethyst · 03-09-2009, 11:53 AM

So do I understand correctly that if your mortgage payment is less than 31 % of my gross income I don't qualify for a modification event if my debt for other things is extremly high?

LHarveyMadman · 03-09-2009, 12:18 PM

I don't know if that has been explicitly stated, but the goals of the modification plan outlined by President Obama is to reduce the burden of one's mortgage payment to around ~33% of gross income. If you are already below that threshold, then your mortgage payments are not the source of your financial hardship.

If you have other debts - student loan, car payments, credit card payments - you should work directly with those creditors to get out from under those burdens.

dma0725 · 03-09-2009, 04:50 PM

My husband is not on the loan. So with my gross income only, I am at 53.31% mortgage to income ratio.

BUT if I include our mortgage to income ratio goes down to 32.89%.
With Obama's plan to reduce mortgage down to 31%, shall I include my husband's income (he is not on the loan!)?

LHarveyMadman · 03-09-2009, 05:03 PM

For most people looking for a modification, their mortgage-to-income ratio is far above 33-38%, even when taking into account all household income. Those are the people who are most in need of a modification.

I suppose you can just choose to withhold information about your husband's income. But maybe that would mean that you would be considered an "irresponsible" borrower because you bought more house that you could afford on your income alone. It might also result in total monthly expenses that result in too much of a deficit to qualify for a modification.

HopingtoFind · 03-09-2009, 08:13 PM

Quote:

Originally Posted by LHarveyMadman

I don't know if that has been explicitly stated, but the goals of the modification plan outlined by President Obama is to reduce the burden of one's mortgage payment to around ~33% of gross income. If you are already below that threshold, then your mortgage payments are not the source of your financial hardship.

If you have other debts - student loan, car payments, credit card payments - you should work directly with those creditors to get out from under those burdens.

The problem is that if you run a business or if you have income from income properties, gross becomes meaningless for evaluating this type of a situation.

I am not understing what the point of looking of gross is anyway... oh well, leave it to the government to figure this out.

kateistired · 03-09-2009, 08:48 PM

This is true unless you have a temporary hardship...My husband was laid off for several months, and we couldn't pay our mortgage. When he returned to work, we needed a mod to catch up our past due payments. Our payment is only 25% of our income, but we couldn't catch up the past due without some sort of modification.

amethyst · 03-10-2009, 04:37 AM

So if I am struggling to get current the bank can still offer me a Mod or the Federal plan won't allow for that.

Dan Bailey · 03-10-2009, 04:48 AM

amethyst,
The govmt. plan is a "suggested" guideline. And is voluntary except for two investors.
At this point, no-one knows what will come of it because it has not been implimented in any circumstance we know of. It is too soon.
General consensus is to continue on as if it didnt even exist yet...contact your lender.

LHarveyMadman · 03-10-2009, 08:43 AM

There's no set rules for modification. It depends on what the investor(s) are willing to do. If you are in need of modification, regardless of circumstances, then you should prepare a well-thought-out letter and send it to your lender for consideration.

dma0725 · 03-10-2009, 09:11 AM

Did a 401K loan to cover the PITI when the mortgage payment went up. So even if my gross pay seems high, my net is low after the 401K auto payment plan. Also started rental business on the peak of mortgage prices. I don't know how to put everything in the hardship letter....one home is now on short sale and have affected my credit score -100 points. So hopefully they will still look at my case even if my back end DTI is high.

~Jess~ · 03-12-2009, 09:07 AM

Quote:

Originally Posted by dma0725

Did a 401K loan to cover the PITI when the mortgage payment went up. So even if my gross pay seems high, my net is low after the 401K auto payment plan. Also started rental business on the peak of mortgage prices. I don't know how to put everything in the hardship letter....one home is now on short sale and have affected my credit score -100 points. So hopefully they will still look at my case even if my back end DTI is high.

From what I read, you will not qualify under Obama's plan if you own more than 1 home. That doesn't mean that the bank doesn't have a different mod program that you might qualify under though.

Moe Bedard · 03-12-2009, 09:59 AM

Jess,

You can do the modification under the Obama plan if you own more than one home...............it is only available on the property that you live in as your principle residence............not any property that you own as an investment.

~Jess~ · 03-12-2009, 11:11 AM

Ahhh...thank you for clarifying.

HobieCat · 03-19-2009, 04:17 PM

Is the 31% of the gross income including rental income or just income from your job? I was confused because rental income is still used for paying the mortgage of the investment house...

Moe Bedard · 03-19-2009, 05:14 PM

the Home Affordable modification is only available on the principle residence................and the 31% front end ratio would only include the mortgage payment from the principle residence that the modification would be for....................

The tental income would be included in the monthly gross income......and the payments for the rentals would be included in the debt ratio.......

The borrower’s Monthly Gross Income is the amount before any payroll deductions includes wages and salaries, overtime pay, commissions, fees, tips, bonuses, housing allowances, other compensation for personal services, Social Security payment, including Social Security received by adults on behalf of minors or by minors intended for their own support, annuities, insurance polices, retirement funds, pensions, disability or death benefits, unemployment benefits, rental income and other income.

Front-End DTI is the ratio of PITIA to Monthly Gross Income. PITIA is defined as principal, interest, taxes, insurance (including homeowners insurance and hazard and flood insurance) and homeowners association and/or condominium fees. Mortgage insurance premiums are excluded from the PITIA calculation.

The Back-End DTI is the ratio of the borrower’s total monthly debt payments (such as Front-End PITIA, any mortgage insurance premiums, payments on all installment debts, monthly payments on all junior liens, alimony, car lease payments, aggregate negative net rental income from
all investment properties owned, and monthly mortgage payments for second homes) to the borrower’s Monthly Gross Income. The servicer must validate monthly installment, revolving debt and secondary mortgage debt by pulling a credit report for each borrower or a joint report for a married couple. The servicer must also consider information obtained from the borrower orally or in writing concerning incremental monthly obligations.

Borrowers who otherwise qualify for a modification under this program, but who would have a post-modification Back-End DTI greater than or equal to 55%, will be provided with a letter stating that they are required to work with a HUD-approved counselor and the modification will not take effect until they provide a signed statement indicating that they will obtain counseling.

HobieCat · 03-20-2009, 10:16 AM

Would there be any surplus/deficit requirement in the financials to be qualified for the Obama's plan?

Moe Bedard · 03-20-2009, 12:18 PM

it has nothing to do with that...............

they are looking at modifying mortgage payments that are over 31% of gross income as outlined above as long as the other criteria is met.

lqb75lo · 03-21-2009, 07:55 AM

Jesse,
unemployment considered as income?

angel83 · 03-21-2009, 08:44 AM

Quote:

Originally Posted by *** Damiano

it has nothing to do with that...............

they are looking at modifying mortgage payments that are over 31% of gross income as outlined above as long as the other criteria is met.

***, are they including all hh income or just who is on the original mortgage note? Is each servicer different? I would think they couldn't be?

kat10 · 03-21-2009, 09:15 AM

Hey there.
Is the 31% guidelines for current mortgages only?

Moe Bedard · 03-21-2009, 09:49 AM

angel,

You would need to ask IndyMac that question..........

kat10,

It would be on the mortgage payment on the first lien regardless of it being current or in default.

HopingtoFind · 03-21-2009, 10:20 AM

I briefly spoke with a supervisor at Chase... and it sounds like if you own more then one property, they will count rental income as your gross income as *** mentioned. They will also then subtract PITIA for that rental property from your gross income... I'll call it adjusted gross income.
Then they will try to get the PITI on the property you're trying to modify to 31% of that adjusted gross income... That is what he told me, don't know if I should completely believe it or not.

angel83 · 03-22-2009, 08:49 AM

Quote:

Originally Posted by *** Damiano

angel,

You would need to ask IndyMac that question..........

kat10,

It would be on the mortgage payment on the first lien regardless of it being current or in default.

to get an accurate response to the question at Indy who should I speak to?

Moe Bedard · 03-22-2009, 08:58 AM

you would need to go through the announcement and look for the contact numbers for the program...............there are steps to take through your online account.
IndyMac Federal Bank - Homeowner Affordability Announcement

kat10 · 03-22-2009, 06:55 PM

More specific than default, how about foreclosure? I'm currently in WF "foreclosure" process. NOD filed w/county this week. I think we should be within Redemption Period? Checking back in w/ WF Exec # on Monday AM.....not wanting to wait to t/b for 2 weeks since NOD has now been filed.

03-09-2009, 11:53 AM	#1 (permalink)
amethyst Junior Member Join Date: Mar 2009 Posts: 2 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	31 percent rule So do I understand correctly that if your mortgage payment is less than 31 % of my gross income I don't qualify for a modification event if my debt for other things is extremly high?

03-09-2009, 12:18 PM	#2 (permalink)
LHarveyMadman Senior Member Join Date: Oct 2008 Location: California Posts: 554 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: 31 percent rule I don't know if that has been explicitly stated, but the goals of the modification plan outlined by President Obama is to reduce the burden of one's mortgage payment to around ~33% of gross income. If you are already below that threshold, then your mortgage payments are not the source of your financial hardship. If you have other debts - student loan, car payments, credit card payments - you should work directly with those creditors to get out from under those burdens.

03-09-2009, 04:50 PM	#3 (permalink)
dma0725 Member Join Date: Mar 2009 Posts: 28 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: 31 percent rule My husband is not on the loan. So with my gross income only, I am at 53.31% mortgage to income ratio. BUT if I include our mortgage to income ratio goes down to 32.89%. With Obama's plan to reduce mortgage down to 31%, shall I include my husband's income (he is not on the loan!)?

03-09-2009, 05:03 PM	#4 (permalink)
LHarveyMadman Senior Member Join Date: Oct 2008 Location: California Posts: 554 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: 31 percent rule For most people looking for a modification, their mortgage-to-income ratio is far above 33-38%, even when taking into account all household income. Those are the people who are most in need of a modification. I suppose you can just choose to withhold information about your husband's income. But maybe that would mean that you would be considered an "irresponsible" borrower because you bought more house that you could afford on your income alone. It might also result in total monthly expenses that result in too much of a deficit to qualify for a modification.

03-09-2009, 08:48 PM	#6 (permalink)
kateistired Senior Member Join Date: Oct 2008 Posts: 159 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: 31 percent rule This is true unless you have a temporary hardship...My husband was laid off for several months, and we couldn't pay our mortgage. When he returned to work, we needed a mod to catch up our past due payments. Our payment is only 25% of our income, but we couldn't catch up the past due without some sort of modification.

03-10-2009, 04:37 AM	#7 (permalink)
amethyst Junior Member Join Date: Mar 2009 Posts: 2 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: 31 percent rule So if I am struggling to get current the bank can still offer me a Mod or the Federal plan won't allow for that.

03-10-2009, 04:48 AM	#8 (permalink)
Dan Bailey Loan Safe Moderator & Homeowner Guide Join Date: May 2008 Location: Wilmington NC Posts: 1,407 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: 31 percent rule amethyst, The govmt. plan is a "suggested" guideline. And is voluntary except for two investors. At this point, no-one knows what will come of it because it has not been implimented in any circumstance we know of. It is too soon. General consensus is to continue on as if it didnt even exist yet...contact your lender. __________________ Loansafe saved my home!! I may be alot of things, but I do know the difference between reply and forward.

03-10-2009, 08:43 AM	#9 (permalink)
LHarveyMadman Senior Member Join Date: Oct 2008 Location: California Posts: 554 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: 31 percent rule There's no set rules for modification. It depends on what the investor(s) are willing to do. If you are in need of modification, regardless of circumstances, then you should prepare a well-thought-out letter and send it to your lender for consideration.

03-10-2009, 09:11 AM	#10 (permalink)
dma0725 Member Join Date: Mar 2009 Posts: 28 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: 31 percent rule Did a 401K loan to cover the PITI when the mortgage payment went up. So even if my gross pay seems high, my net is low after the 401K auto payment plan. Also started rental business on the peak of mortgage prices. I don't know how to put everything in the hardship letter....one home is now on short sale and have affected my credit score -100 points. So hopefully they will still look at my case even if my back end DTI is high.

03-12-2009, 09:59 AM	#12 (permalink)
Moe Bedard Founder Join Date: Aug 2007 Location: Southern California Posts: 16,888 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: 31 percent rule Jess, You can do the modification under the Obama plan if you own more than one home...............it is only available on the property that you live in as your principle residence............not any property that you own as an investment. __________________ Moe Bedard Founder LoanSafe.org "America's #1 Home Loan Forum" LoanWorkout.org "America's # Loan Modification Blog" Get My FREE Loan Modification E-Book \| Please donate to LoanSafe.org \| Loan Modification Training For Attorneys \| Rate Your Mortgage Servicer The comments by me and the materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. Most of the information you find here is easily available on the internet. You should contact your attorney to obtain advice with respect to any particular issue or problem. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney. Please Read our Privacy Policy and Legal Disclaimer Here.

03-12-2009, 11:11 AM	#13 (permalink)
~Jess~ Senior Member Join Date: Dec 2008 Posts: 82 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: 31 percent rule Ahhh...thank you for clarifying.

03-19-2009, 04:17 PM	#14 (permalink)
HobieCat Senior Member Join Date: Oct 2008 Posts: 44 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: 31 percent rule Is the 31% of the gross income including rental income or just income from your job? I was confused because rental income is still used for paying the mortgage of the investment house...

03-19-2009, 05:14 PM	#15 (permalink)
Moe Bedard Founder Join Date: Aug 2007 Location: Southern California Posts: 16,888 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: 31 percent rule the Home Affordable modification is only available on the principle residence................and the 31% front end ratio would only include the mortgage payment from the principle residence that the modification would be for.................... The tental income would be included in the monthly gross income......and the payments for the rentals would be included in the debt ratio....... The borrower’s Monthly Gross Income is the amount before any payroll deductions includes wages and salaries, overtime pay, commissions, fees, tips, bonuses, housing allowances, other compensation for personal services, Social Security payment, including Social Security received by adults on behalf of minors or by minors intended for their own support, annuities, insurance polices, retirement funds, pensions, disability or death benefits, unemployment benefits, rental income and other income. Front-End DTI is the ratio of PITIA to Monthly Gross Income. PITIA is defined as principal, interest, taxes, insurance (including homeowners insurance and hazard and flood insurance) and homeowners association and/or condominium fees. Mortgage insurance premiums are excluded from the PITIA calculation. The Back-End DTI is the ratio of the borrower’s total monthly debt payments (such as Front-End PITIA, any mortgage insurance premiums, payments on all installment debts, monthly payments on all junior liens, alimony, car lease payments, aggregate negative net rental income from all investment properties owned, and monthly mortgage payments for second homes) to the borrower’s Monthly Gross Income. The servicer must validate monthly installment, revolving debt and secondary mortgage debt by pulling a credit report for each borrower or a joint report for a married couple. The servicer must also consider information obtained from the borrower orally or in writing concerning incremental monthly obligations. Borrowers who otherwise qualify for a modification under this program, but who would have a post-modification Back-End DTI greater than or equal to 55%, will be provided with a letter stating that they are required to work with a HUD-approved counselor and the modification will not take effect until they provide a signed statement indicating that they will obtain counseling. __________________ Moe Bedard Founder LoanSafe.org "America's #1 Home Loan Forum" LoanWorkout.org "America's # Loan Modification Blog" Get My FREE Loan Modification E-Book \| Please donate to LoanSafe.org \| Loan Modification Training For Attorneys \| Rate Your Mortgage Servicer The comments by me and the materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. Most of the information you find here is easily available on the internet. You should contact your attorney to obtain advice with respect to any particular issue or problem. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney. Please Read our Privacy Policy and Legal Disclaimer Here.

03-20-2009, 10:16 AM	#16 (permalink)
HobieCat Senior Member Join Date: Oct 2008 Posts: 44 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: 31 percent rule Would there be any surplus/deficit requirement in the financials to be qualified for the Obama's plan?

03-20-2009, 12:18 PM	#17 (permalink)
Moe Bedard Founder Join Date: Aug 2007 Location: Southern California Posts: 16,888 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: 31 percent rule it has nothing to do with that............... they are looking at modifying mortgage payments that are over 31% of gross income as outlined above as long as the other criteria is met. __________________ Moe Bedard Founder LoanSafe.org "America's #1 Home Loan Forum" LoanWorkout.org "America's # Loan Modification Blog" Get My FREE Loan Modification E-Book \| Please donate to LoanSafe.org \| Loan Modification Training For Attorneys \| Rate Your Mortgage Servicer The comments by me and the materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. Most of the information you find here is easily available on the internet. You should contact your attorney to obtain advice with respect to any particular issue or problem. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney. Please Read our Privacy Policy and Legal Disclaimer Here.

03-21-2009, 07:55 AM	#18 (permalink)
lqb75lo Member Join Date: Mar 2009 Posts: 19 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: 31 percent rule Jesse, unemployment considered as income?

03-21-2009, 09:15 AM	#20 (permalink)
kat10 Senior Member Join Date: Feb 2009 Posts: 119 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: 31 percent rule Hey there. Is the 31% guidelines for current mortgages only?

03-21-2009, 09:49 AM	#21 (permalink)
Moe Bedard Founder Join Date: Aug 2007 Location: Southern California Posts: 16,888 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: 31 percent rule angel, You would need to ask IndyMac that question.......... kat10, It would be on the mortgage payment on the first lien regardless of it being current or in default. __________________ Moe Bedard Founder LoanSafe.org "America's #1 Home Loan Forum" LoanWorkout.org "America's # Loan Modification Blog" Get My FREE Loan Modification E-Book \| Please donate to LoanSafe.org \| Loan Modification Training For Attorneys \| Rate Your Mortgage Servicer The comments by me and the materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. Most of the information you find here is easily available on the internet. You should contact your attorney to obtain advice with respect to any particular issue or problem. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney. Please Read our Privacy Policy and Legal Disclaimer Here.

03-21-2009, 10:20 AM	#22 (permalink)
HopingtoFind Senior Member Join Date: Oct 2008 Posts: 653 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: 31 percent rule I briefly spoke with a supervisor at Chase... and it sounds like if you own more then one property, they will count rental income as your gross income as *** mentioned. They will also then subtract PITIA for that rental property from your gross income... I'll call it adjusted gross income. Then they will try to get the PITI on the property you're trying to modify to 31% of that adjusted gross income... That is what he told me, don't know if I should completely believe it or not.

03-22-2009, 08:58 AM	#24 (permalink)
Moe Bedard Founder Join Date: Aug 2007 Location: Southern California Posts: 16,888 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: 31 percent rule you would need to go through the announcement and look for the contact numbers for the program...............there are steps to take through your online account. IndyMac Federal Bank - Homeowner Affordability Announcement __________________ Moe Bedard Founder LoanSafe.org "America's #1 Home Loan Forum" LoanWorkout.org "America's # Loan Modification Blog" Get My FREE Loan Modification E-Book \| Please donate to LoanSafe.org \| Loan Modification Training For Attorneys \| Rate Your Mortgage Servicer The comments by me and the materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. Most of the information you find here is easily available on the internet. You should contact your attorney to obtain advice with respect to any particular issue or problem. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney. Please Read our Privacy Policy and Legal Disclaimer Here.

03-22-2009, 06:55 PM	#25 (permalink)
kat10 Senior Member Join Date: Feb 2009 Posts: 119 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: 31 percent rule More specific than default, how about foreclosure? I'm currently in WF "foreclosure" process. NOD filed w/county this week. I think we should be within Redemption Period? Checking back in w/ WF Exec # on Monday AM.....not wanting to wait to t/b for 2 weeks since NOD has now been filed.

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