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Loan Modification - Expenses to show on Income/Expense statements

Discussion in 'Loan Modification' started by hsala, Aug 3, 2011.

  1. hsala

    hsala LoanSafe Member

    Had a question on the expenses and income details we show when we submit for loan modification, I currently send around 500 dollars every month to my parents back home in India for the loan (mortgage) payment they do on the home they stay (the home & the loan is on my father's name & I don't have my name on either), should I mention this as home loan mortgage payment expense or family maintenance expense? The reason I am asking is because this monthly payment (ACH money transfer) will show up in the bank statement I submit & I am guessing they will ask more details about this payment I do.
  2. Cat Damiano

    Cat Damiano Mortgage Wars


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

    For the modification payment calculation purpose they will only be looking to see that your payment on the first mortgage lien on your property is more than 31 percent of your gross income including Principal, Interest, Taxes, Insurance, and HOA fees if applicable.

    When calculating the back end debt ratio, or expenses the following is what they consider in that calculation.

    According to HAMP:

    5.4 Verifying Monthly Gross Expenses

    Servicers must verify the borrower’s monthly gross expenses as reported by the borrower on the
    RMA using the credit report, tax returns or transcripts and other verification documentation
    provided by the borrower. Monthly gross expenses include the monthly charges described in the
    following list:

    The monthly mortgage payment, taxes, property insurance, homeowner’s or
    condominium association fee payments and assessments related to the property whether
    or not they are included in the mortgage payment.
    Any mortgage insurance premiums.

    Monthly payments on all closed-end subordinate mortgages.

    Alimony, child support and separate maintenance payments with more than ten months
    of payments remaining, if supplied by the borrower.

    Car lease payments, regardless of the number of payments remaining.

    Monthly payments on revolving or open-end accounts, regardless of the balance. In the
    absence of a stated payment, the payment will be calculated by multiplying the
    outstanding balance by three-percent.

    Aggregate negative net rental income from all investment properties owned, if supplied
    by the borrower.

    Monthly mortgage payment for second home including principal, interest, taxes and
    insurance and, when applicable, leasehold payments, homeowner association dues,
    condominium unit or cooperative unit maintenance fees, but excluding unit utility charges.

    Payments on all installment debts with more than ten months of payments remaining,
    including debts that are in a period of either deferment or forbearance. When payments
    on an installment debt are not on the credit report or are listed as deferred, the servicer
    must obtain documentation to support the payment amount included in the monthly debt
    payment. If no monthly payment is reported on a student loan that is deferred or is in
    forbearance, the servicer will obtain documentation verifying the proposed monthly
    payment amount, or use a minimum of 1.5 percent of the balance.

    Monthly payment on a HELOC will be included in the payment ratio using the minimum
    monthly payment reported on the credit report. If the HELOC has a balance, but no
    monthly payment is reported, the servicer will obtain documentation verifying the
    payment amount, or use a minimum of one percent of the balance.

    A servicer should not consider expenses of non-borrower household members when calculating
    monthly gross expenses.
  3. hsala

    hsala LoanSafe Member

    Loan Modification - Income and Expenses

    Thanks Cat for your quick and detailed explanation, I will not include this expense in the expense list.

    had a question on the Gross income used for loan modification, In my paystub I see two places where I see the gross word. one says "Total Gross" and the other says "W2 gross wages", the "total gross" value is higher than the "W2 gross wages", the difference is the ESPP (employee stock purchase plan) amount I put in every paycheck. So for calculating the loan modification eligibility do they use the "Total gross" or "W2 gross wages" ?

    Appreciate your feedback.
  4. FeelingFree

    FeelingFree LoanSafe Member

    Cat, not to hijack the thread, what is the "sweet spot" lenders are looking for here?

    Total debt, total assets, allowable amount in savings etc?

    I have already been turned down for HAMP because income levels were too high. I just received an in-house worksheet to be considered for an in-house mod from Indymac. I know there are numbers I need to be under or around in these categories to possibly get approved. Do you have any ideas? What is too much or too little?

  5. Cat Damiano

    Cat Damiano Mortgage Wars


    I am not really sure due to the fact that each lender has a different criteria for the in house modifications.
    You may want to ask Charlie to help with that sheet as he deals with many different lenders, he should be able to help you put together a budget that will help with the approval process.

    Charlie Rose
    1-877-737-8440 x103
  6. bcoulsey

    bcoulsey LoanSafe Member

    Hi Cat

    I have a question concerning loan mods. My wife and I just got the letter from AMHSI stating that they finally received our paperwork and are starting the HAMP paperwork. It has taken a year, and over 100 faxes and snail mail of the same paperwork and pay stubs to get this far. What should we expect next? It has been so long that I have forgotten what we have filled out and sent in. Can you tell me what will come next? All we have gotten is the "we got your paperwork and are starting the HAMP application" letter.
  7. Cat Damiano

    Cat Damiano Mortgage Wars


    For HAMP, after the lender receives the modification package from you:

    4.6 Review of Initial Package

    Within 30 calendar days from the date an Initial Package is received, the servicer must review the
    documentation provided by the borrower for completeness. If the documentation is incomplete or
    insufficient for use in underwriting, the servicer must send the borrower an Incomplete Information

    If the borrower’s documentation is complete, the servicer must evaluate the borrower’s eligibility
    for HAMP and either:

    Send the borrower a TPP Notice, or
    Make a determination that the borrower is not eligible for HAMP and communicate this
    determination to the borrower.

    The next steps taken will be verifying the information given, verifying income, verifying occupancy, verifying expenses, checking for fraud, checking borrowers signatures and making sure the package is complete.

    The next step is underwriting:

    Servicers must determine the borrower’s eligibility for a modification using information obtained in
    the Initial Package and subsequently verified. Servicers are required to complete their
    assessment of borrower eligibility and notify the borrower of the eligibility determination within 30
    calendar days of receiving all required borrower documentation.

    While in underwriting there will be a property valuation ordered:

    Servicers must obtain an assessment of the current value of the property securing the mortgage
    loan being evaluated for HAMP. Servicers may use either an automated valuation model (AVM),
    provided that the AVM renders a reliable confidence score, a broker’s price opinion (BPO) or an
    appraisal. Confidence scores deemed reasonable by bank examiners are also considered
    reasonable for purposes of this program. A servicer may use an AVM provided by one of the
    GSEs. As an alternative, servicers may rely on their internal AVM provided that.

    Net Present Value (NPV) testing:

    All loans that meet HAMP eligibility criteria and are either deemed to be in imminent default or
    delinquent as to two or more payments must be evaluated using a standardized NPV test that
    compares the NPV result for a modification to the NPV result for no modification.

    If you pass the NPV test and are approved you will be issued a Trial Plan:

    The TPP Notice describes the terms and conditions of the trial period and sets forth the required
    payment due dates. Borrowers are not required to sign or return the TPP Notice. Servicers
    should retain a copy of the TPP Notice in the borrower file and note the date that it was sent to
    the borrower.

    All in all the timeline has varied greatly for each individual so making a determination on how long this process that I have outlined will take in your individual circumstance would be impossible. Figure anywhere from 30-90 days on average to get to the Trial plan.
  8. FeelingFree

    FeelingFree LoanSafe Member

    I will do that.

  9. hsala

    hsala LoanSafe Member

    Hello Cat,

    had a question on the Gross income used for loan modification, In my paystub I see two places where I see the gross word. one says "Total Gross" and the other says "W2 gross wages", the "total gross" value is higher than the "W2 gross wages", the difference is the ESPP (employee stock purchase plan) amount I put in every paycheck. So for calculating the loan modification eligibility do they use the "Total gross" or "W2 gross wages" ?

    Thanks & appreciate your feedback.
  10. Cat Damiano

    Cat Damiano Mortgage Wars


    I can only tell you what the guidelines are requiring, for a specific amount you may want to contact Citi to ask that question.

    Here is what the guidelines state:

    6.1.1 Monthly Gross Income

    Monthly gross income is the borrower’s income amount before any payroll deductions and

    Wages and salaries, overtime pay, commissions, fees, tips, bonuses, housing
    allowances, and/or other compensation for personal services.
    Social Security payments, food stamps and adoption subsidies, including those received
    by adults on behalf of minors or by minors intended for their own support.
    Monthly income from annuities, insurance policies, retirement funds, pensions and
    disability or death benefits.
    Rental income and other miscellaneous sources of income.
  11. Cat Damiano

    Cat Damiano Mortgage Wars


    I was actually just able to locate this additional information which is what your ESPP plan may fall under so use the calculations to check if you would need to include that as income.

    5.1.8 Threshold for Documenting Passive and Non-Wage Income

    Notwithstanding the other provisions of this Section 5.1, passive and non-wage income (including
    rental, part-time employment, bonus/tip, investment and benefit income) does not have to be
    documented if it constitutes less than 20 percent of the borrower’s total gross income. Servicers
    must identify the specific sources and amount of a borrower’s passive or non-wage income and
    may not assume that a portion of the borrower’s income is passive. Servicers must obtain income
    documentation to verify passive or non-wage income when it equals or exceeds 20 percent of the
    borrower’s total gross income.
  12. hsala

    hsala LoanSafe Member

    Thanks for the quick response Cat,

    Here is my situation (see attached image)

    My "total gross" on the pay stub is 4655 dollars

    "ESPP" deduction is 464 dollars

    "W2 gross wages" is 4171 dollars

    The ESPP deduction is the amount I am investing my company stock(464 dollars), so my question is which is my gross income 4655 or 4171 ? if it is 4171 then I qualify for Loan modification & if it is 4655 then I don't qualify as I exceed the magic number (31%) for loan modification eligibility.

    Appreciate your feedback.

    View attachment 741
  13. Cat Damiano

    Cat Damiano Mortgage Wars

    Try submitting it using just the W2 gross income and see what happens, because that amount doesn't seem to come to more than 20 percent of the gross income anyway and it would seem that according to the guidelines it should fall under the term of investment and benefit income.
  14. hsala

    hsala LoanSafe Member

    Thanks Cat, I will submit the application using the W2 gross income and see what they say.

    had another question : How is the "Magic Number" 31% eligibility for Loan Modification calculated ?

    I talked to a loan modification agent last week & he mentioned that 31 % is calculated using your first mortgage principle + Interest + Tax on the home + Insurance + HOA fees. He also mentioned that the second mortgage is not consider while doing this calculation, is it true ? if we don't include the second mortgage doesn't it exclude a big payment we are making towards the home ?

  15. Cat Damiano

    Cat Damiano Mortgage Wars

    The loan modification person was correct. The modification to the 31 percent is only on the first mortgage payment. If you are modified under a HAMP modification on your first, once you receive the permanent modification they should then notify you for the HAMP program on the second lien at that time.
  16. hsala

    hsala LoanSafe Member

    Thanks Cat !! Appreciate your prompt feedbacks.

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