WFHM denied NACA mod because I do not have long term + "default" hardship

[sammor]

Hello, Thanks in advance for any insight, advice. My case: WFHM is service, Freddie Mac is investor. I have 5%, 15 year fixed. Mortgage balance is $60,000. Home value $400,000. I have lived here 30 years with goal of paying the house off by retirement. I was unemployed for almost 2 years and was denied mod because Freddie did not accept unemployment as income. I am employed this year since January 2012, applied for HAMP, again, but through NACA this time. I even went to event and sat face to face with WFHM underwriter. Months went by. I am contact with someone on WFHM executive team. He tells me they are waiting for NACA to instruct them (WFHM) if they should modify or not. That they took direction from NACA. I asked to have this in writing but of course not. WFHM is great for telling you one thing on the phone that is complete bunk and saying something different in a letter. I told him all I wanted was to have term extended from 15 to 30 years and lower rate so payments are affordable. Although employed I was making less income and have big debt - credit card and student loan. Current income does not cover all expenses.

I get letter asking me to check box that fits my "default" hardship. Options were death of co-borrower or spouse, divorce, etc. WFHM knows there is no co-borrower on the mortgage and they have copies of tax returns for the last few years and know I file single so this new document (I've never had this before) sounds like more baloney. In any case I was denied because my situation was not "default" hardship and I could not prove my hardship was long term.

My questions to the forum: (1) I thought loss of income, underemployment qualified for modification? I hope I am not underemployed forever but I have no crystal ball that tells me when I will get a job that pays 1.5 times as much as I make now. (2) Isn't it about total debt:income ratio? Credit card, 2d mortgage and student loan debt don't count? There is no way I can pay those bills, and property taxes, etc. There is not enough after tax income to cover it all. How can I find out what Freddie Mac requirements are? (3) Is equity in the home a factor for the sake of a modification? Mine is not an underwater case so the servicer does not have much skin in the game. But should that matter legally?

And lastly, are there other programs I can apply for like Making Home Affordable that might work for my situation? I am not sure what the program is through NACA. Thank you very much for your time and advice.

[sammor]

I have no liquid assets right now. Savings and 401(k) are gone. I used these funds, along with credit card to stay current on mortgage and other bills during the 2 years of unemployment. I wish WFHM would just be straightforward and explain it as you did. Maybe that is what WFHM means by not showing long term disability. Lastly, the fact that they do not count other debt is ludicrous. If I make mortgage payments and default on the other debt that would be fine.

A year and a half ago, WFHM sent intent to foreclose letter. They paid 2 quarters of property taxes. I was current on the 1st quarter and then paid 2d quarter when do. When I filed complaint with Comptroller of Currency about these tactics (and I was current on mortgage payment as well at that point) their response was 20 pages showing escrow account they set up, letter stating I did not provide them all the paperwork they requested, a more nonsense and falsehoods. They pulled this stunt for no reason at all and then tried to justify their action. They never admit they do anything wrong. This year I actually fell behind a quarter on property taxes and they swooped in, paid 2 quarters and then said I had to pay 2x the amount to clear escrow overage. I cannot pay that or the new monthly payment so June is not paid. I've not gotten bill for July but it won't get paid either. I am not sure about August but will start new job then so I'll have to see.

[Jeffrey L. Shurtliff]

Pursuant to Freddie Mac's immenent default guidelines; a borrower with less than 25 thousand dollars of liquid assets is in danger of default. This constitutes a valid hardship..........Jeffrey

[jakelabry]

But isn't that much equity in the home considered a "liquid asset?" A mortgage balance of 60K on a home valued at 400K? They will simply tell OP to sell it if he/she can't afford it.

[Jeffrey L. Shurtliff]

For an asset to be liquid it needs an established market with enough participants to absorb the selling without materially impacting the price of the asset. There also needs to be a relative ease in the transfer of ownership and the movement of the asset. Liquid assets include most stocks, money market instruments and government bonds. The foreign exchange market is deemed to be the most liquid market in the world because trillions of dollars exchange hands each day, making it impossible for any one individual to influence the exchange rate.

[jakelabry]

Okay, BUT with that much equity, the bank will still expect the owner to sell it if they cannot afford the payments.

[Cat Damiano]

Hi sammor,


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


Unfortunately the modification is only going to address the affordability of the mortgage payment alone. If your back end debt, ie credit cards and unsecured loans is more than 55 percent of your gross income, what would be recommended is counseling to help you with a budget for that debt. It sounds like without that debt your mortgage would be at an affordable level.

What is your current gross income per month?
How much is the mortgage payment including principal, interest, taxes, and insurance monthly?

Have you though about speaking to a HUD counselor to help you with a budget for the back end debt?

U.S. Department of Housing and Urban Development (HUD)

[lwillhite]

Hello sammor,

You are correct that it is nearly impossible to get a permanent modification based on Unemployment benefits since unemployment is considered a temporary hardship, not just by Freddie Mac, but nearly all investors. A permanent reduction in income however, is considered a legitimate hardship for the purposes of modifying the mortgage. When NACA submits a proposal for modification, the servicer is asked to look at all potential solutions for the situation, not just HAMP or an in-house modification.

The sad fact is that it is much harder to get a modification when the mortgage is current. The bank cannot see that you are sacrificing elsewhere to do the right thing and meet your obligations. All they can see is that you are making the mortgage payment on time every month. It becomes a case of “actions speak louder than words”. You may apply for a modification, but the fact that you pay your mortgage every month tells them that you do not have a problem paying because you ARE paying.

I have seen many cases where people borrow money from another source to make the mortgage payment. When people borrow money to make an unaffordable mortgage payment, they make TWO huge mistakes: First, by making the payment, they again tell the bank that they can make the payment without problem, because they ARE making the payment. Second, by borrowing money for the payment, they are only transferring debt from one source to another. Any consumer or financial advisor will tell you that is a guaranteed path to disaster. You now have two debts you can’t pay back instead of one.

That being said, NACA will never tell you to not make your mortgage payment if you can afford to. Responsible home ownership is the foundation of NACA’s mission. But many people who can’t afford the payment make a mistake by draining their 401-K, credit cards, etc. to make the payment. Eventually it will only make the problem worse since you make it harder to get a modification and you are also depleting your retirement or creating another huge debt you can’t afford.

Many lenders do have a “gray area” called Imminent Default. Basically, you must prove that you are about to go past due on the mortgage and cannot do anything about it, and one of the "Three D's" must also be a factor: Death, Divorce or Disability. Reduced income through unemployment or business decline will not qualify. However, you did not have one of those "Three D's" in your case and therefore did not qualify under Imminent Default.

Most investors do require that the mortgage be at least two months late or qualify under Imminent Default. This means the fact that you are now past due, combined with your reduced income, actually improves your chances of getting a modification. If you have not done so already, please contact us so we can go to work on creating a new modification proposal for you.

Tim Trumble
Online Operations, NACA
ttrumble@naca.com