The CARES Act was designed to help struggling homeowners during the COVID pandemic by offering mortgage forbearance options. Millions of homeowners took advantage and didn’t have to pay their mortgage for three months or longer, depending on the lender.
Now that the forbearance period has ended, many homeowners still need help. If you have a mortgage owned by Freddie Mac or Fannie Mae, you may be eligible for a Flex Loan Modification.
Please keep reading to learn what it’s all about.
How to Get a Flex Loan Modification
Any borrower who is 60 days or more past due on their mortgage or in an imminent default risk may be eligible for the Flex Loan Modification. This new program replaced the previous Home Affordable Modification Program and is only for borrowers with a Freddie Mac or Fannie Mae Loan.
To qualify, you must meet the following:
- You’re experiencing an eligible hardship that affects your ability to pay your mortgage
- You don’t have enough money to cover the mortgage payment and taxes/insurance as it stands
- You have a stable income that allows you to pay the modified mortgage
- You must have originated the mortgage at least 12 months before the request for a loan modification
- You aren’t eligible for a refinance or relief refinance based on your financial situation
- A relief option, such as breaking up the past due amount over a series of months, isn’t feasible
The loan also must not be in the middle of any assistance or recourse, including any workout options, forbearance plans, or active trial plans.
You also must not have modified the mortgage more than 3 times in the past or have failed a past trial period within the last 12 months.
If you’re eligible, you must provide all documentation for a Borrower Response Package, including:
- A completed and signed Uniform Borrower Assistance Form
- Documentation of your hardship
- Proof of income to show that you can afford the loan
Some borrowers may be eligible for a streamlined program if they:
- Are more than 90 days past due and in imminent danger of foreclosure
- Have a step-rate mortgage and become 60 days or more past due within the first 12 months of the interest rate change date
If you’re eligible for a streamlined modification, you don’t have to complete the Borrower Response Package. The lender can modify your loan immediately to avoid the risk of foreclosure.
What Does the Flex Modification Program Offer?
Eligible borrowers may get a more affordable mortgage payment so they aren’t at risk of losing their home.
Lenders have a few options when modifying your mortgage, including:
- Adjusting your interest rate
- Extending your loan term
- Adding the past due amount to the back of the loan and re-amortizing your loan over the new extended term
One final option is setting up a forbearance agreement for part of the loan (usually the amount past due). The lender would then amortize the loan using the current balance without the past due amounts, and the past due amount would become a balloon payment that’s due at the end of the loan. So if you keep the loan for the entire term, your final payment would be the full amount of what is due.
What are the Benefits?
Eligible borrowers experience many benefits with a Flex Modification including:
- Your home loan will be current once you pass the trial period.
- You won’t have to worry about losing your home if you remain current on your new payments.
- Your payments may be as much as 20 percent lower depending on how the lender adjusted your loan.
Do you Need to Apply?
If you are 60 – 90 days behind on your mortgage, you can apply for a Flex Modification if Fannie Mae or Freddie Mac owns your loan.
But, lenders are required to offer the program to any borrower who is 90 days to 105 days past due. So if you are late on your mortgage, you may see this offer from your lender. It won’t tell you the details of the arrangement or what you qualify for, but they will offer you the chance to check your loan and the possibilities to modify it.
By law, if you apply for a modification more than 37 days before your home goes into foreclosure, the foreclosure proceedings must stop. The lender may process your request for a modification, and they start foreclosure proceedings again unless you don’t meet the requirements for a modification.
Passing the Trial Period
All borrowers who get approved for the modification program must go through a trial period. It usually lasts 3 to 4 months. The lender uses this time to make sure you can afford the payments. You must make the payments on time to ‘pass the trial period.’ If you don’t pass, your loan reverts to its original state, and you risk losing your home.
If you make the payments on time, though, the modification replaces your original mortgage and you have a new payment.
Get Help if You’re Struggling
If you’re struggling to make your home loan payments, ask for help. Most lenders are offering the program that has helped millions of borrowers keep their homes while making their loans more affordable.
It’s essential to contact your lender as soon as you know you’re struggling.
Don’t wait and let the home go into foreclosure.
If you wait too long, it could leave you without any options. Discuss your options with your lender, ask as many questions as you need, and figure out the plan to help you keep your home during these trying times.
To get free help online, visit our online mortgage forum at this link.
For those out there who need some housing counseling, please visit the Consumer Financial Protection Bureau’s (CFPB) “Find a Counselor” tool to search for counseling agencies in your area.
Moe Bedard is the founder and lead mortgage analyst for LoanSafe.org. Since 2007, LoanSafe has helped over 2 million consumers with solutions to their mortgage problems and has been featured in the New York Times, LA Times, Fox Business, and many other media publications.