Previous Loan Modification and Trying to Refinance

[Erik Sandstrom]

*****Updated Guidelines for Refinancing a Loan Previously Modified:*****

If you are refinancing a loan that has been modified the guidelines below are what is now required.

• Copy of the Modification Agreement to verify acceptable terms
• Borrower had to make at least 24 timely mortgage payments based on the terms of the restructured loan

Apply online here: www.LoansReduced.com



OLD GUIDELINES
OK Team,
I just received a call back from my underwriting department regarding previous loan modifications on loans and the borrowers attempting to refinance under HARP, Conventional or FHA.

The big thing to watch out for is if you received a principal reduction, deferment or curtailment those loans are ineligible for submission. Why they are ineligible is because the payoff from the lender will be different from the unpaid balance.

GREAT NEWS!! If you ONLY received an interest rate reduction, term extension or past due payments pushed to the end of the term we may be able to help.

I know many of our borrowers have been turned away. I myself have even turned away homeowners with previous loan modifications. If you want to determine if your loan IS eligible for refinancing, my underwriting department has given me the ability to submit the modification agreement and they will come back and determine if the loan is eligible.

 

[PaulSh]

Hi Eric. That sounds like good news for the folks whose modifications were limited to interest rate reduction or term extension. Thanks for the update. Unfortunately, I have modification that includes a principal reduction. Through my research I've determined that my situation is not eligible for most refinance products out there except the FHA Short Refinance program. You can find details of the program in Mortgagee Letter 2010-23 as well as the Mortgage Loan Place Complete Guide to FHA Loans. This is literally a loan product that is designed to refinance borrowers with modified loans or loans that may receive principal reductions into an FHA loan. The difficulty now is finding a lender who does these loans. Do you know if you can access that program or do you know of lenders who are using that program?

 

[Evan Bedard]

GREAT NEWS!! If you ONLY received an interest rate reduction, term extension or past due payments pushed to the end of the term we may be able to help.

This is awesome news Erik! As you know this has become common question many have been having who are pursuing a refi under HARP. It makes sense why a loan would be ineligible for a refinance after a large reduction in the balance, but that is great news for those who have received just an interest rate reduction or extension of term

 

[In GA]

OK Team,
I just received a call back from my underwriting department regarding previous loan modifications on loans and the borrowers attempting to refinance under HARP, Conventional or FHA.

The big thing to watch out for is if you received a principal reduction, deferment or curtailment those loans are ineligible for submission. Why they are ineligible is because the payoff from the lender will be different from the unpaid balance.

GREAT NEWS!! If you ONLY received an interest rate reduction, term extension or past due payments pushed to the end of the term we may be able to help.

I know many of our borrowers have been turned away. I myself have even turned away homeowners with previous loan modifications. If you want to determine if your loan IS eligible for refinancing, my underwriting department has given me the ability to submit the modification agreement and they will come back and determine if the loan is eligible.

HI Erik,

I have a question on this topic if you have the chance to answer that would be awesome!

If loans are ineligible for refinance ( due to principal deduction from a HAMP mod) which would cause the payoff from the lender would be different amount than the unpaid balance - would this be something that would CHANGE once you past the 3 year mark and this amount is completely forgiven?

In my mod - if I make my payments on time at the 1st year, 2nd year and 3rd year mark I have 1/3 of the amount of my Principal deduction amount forgiven. So if my HAMP mod started 10/12 then if paid on time by 10/15 that amount is forgiven.

My question for you is once I have the principal deduction amount forgiven would my payoff amount then match my unpaid balance amount and at that time would I be able to be considered for a refinance?

I ask because I do have a set interest rate of 4.125 - for 22 years and if by chance lower rates are still around once I have the principal reduction forgiven I wondered if I would have the option to refinance down the road.

2nd question - I do have my final signed loan mod documents and in Section 3.C. it says: provided I am not in default under the terms of this Agreement and I pay my Note in full(i) any time more than 30 calendar days after the Modification Effective Date, and (ii) prior to the application of the entire Deferred Principal Reduction Amount, I shall be fully vested in and entitled to the unapplied amount of the Deferred Principal Reduction Amount and the unapplied amount shall be deducted from my payoff balance.

Below this in Section 3.F. it says : I agree to pay in full the Deferred Principal Balance less any Deferred Principal Reduction Amount to which I am antitled, and any other amounts still owed under the Loan Documents by the earliest of (i) the date I sell or transfer an interest in the Property, (ii) th date I pay the entire Interest Bearing Principal Balance, or (iii) the maturity Date.

So my 2nd question is - what does this mean? Would this apply to getting a refinance or is this only for if I were to sell the property before the 3rd year of having the deferred principal reduction forgiven? (I felt that if we had a job loss now we would at least have the option to try to sell the house where before the HAMP mod while we were so very underwater that would have been impossible). Is this correct?

Sorry to ask such a basic question - I just really want to understand my Mod and my future options!

PS - again a HUGE thank you to all the help and advice I found on this site (Evan and Cat and everyone!)- without this site and encouragement I would not have tried for a mod - I felt my only option to keep my home was to file a lawsuit and that is so costly! THANKS!!!

 

[Lovey]

OK Team,
I just received a call back from my underwriting department regarding previous loan modifications on loans and the borrowers attempting to refinance under HARP, Conventional or FHA.

The big thing to watch out for is if you received a principal reduction, deferment or curtailment those loans are ineligible for submission. Why they are ineligible is because the payoff from the lender will be different from the unpaid balance.

GREAT NEWS!! If you ONLY received an interest rate reduction, term extension or past due payments pushed to the end of the term we may be able to help.

I know many of our borrowers have been turned away. I myself have even turned away homeowners with previous loan modifications. If you want to determine if your loan IS eligible for refinancing, my underwriting department has given me the ability to submit the modification agreement and they will come back and determine if the loan is eligible.

What about refinancing on your primary home that was never under a loan modification.
We would like to refinance our primary home with a rate of 5.125% but we did a loan mod on our rental property and our credit took a huge hit. Would the damage prevent a decent refi? Would it be worth it?

 

[Erik Sandstrom]

I have recently got loans approved post-loan modification. Principal reduction and / or temporary rate reduction. Here is the catch: The 1st mortgage can't be more than 70% of the home value and the loan amount must be at least $300k. Credit score needs to be 620+. If this fits you, reach out to me. Thanks!

Thanks for the info Jon!

To update this post, our guidelines have changed to allow refinances after loan modifications as long as 12 months of payments have been made on time. Once that time has elapsed as long as you meet the conventional/FHA/HARP criteria you're eligible to refinance. Principal reductions, forbearance and other other items are ok now. This guideline was updated about 4-5 months ago but still certain lenders have their own set criteria when it comes down to refinancing post loan modification.

**Updated guidelines posted below, they have recently changed**

 

[Joeywah]

I am trying to refinance my home and it seems that Green Tree is giving me grief on my subordination of my 2nd mortgage that they hold. Don't know what to do all the horror stories you here about these people and the law still allows them to operate there shady business practices. Does anyone have any ideas?




Hello Eric, I have a few questions if I might ask, about 4 years ago I got divorced and decided to keep the house which is naturally underwater as a lot of homes are in Arizona. My 1st mortage and 2nd were both owned by Bank of America. I was able to get a modification after a year of struggle since Bank of America was giving me the run around, what I mean by that is I received nothing but bad info from whoever I spoke to in the bank. I was told to apply over and over again and then my application was turned down do to some I not being dotted or some T not being crossed. Finally both loans were sold to Green Tree again a nightmare. Green Tree kept stating that a modification was just not on the table because I never missed a payment. I did my homework and contacted Fannie Mae myself and was lucky enough to contact someone who shall remain nameless and she coached me on what to say and do with Green Tree. A year after the start I finally received a modification on my 1st and 2nd mortgage based on my divorce and loss of income do to it and the economy. I cannot complain about the mod the 1st mortgage was reduced to a 2% and the 2nd mortgage to 1% the bad part is my ex wife's name still remained on the 1st mortgage the title of the home was signed over into only my name, 2nd mortgage has always been in my name only. The ex wife was okay with all of this until last December when I remarried now she wants her name off the 1st mortgage and has taken me to court to force me to either short sale or refinance. Well I am in the process of refinancing knowing that I will never get a 2% intrest rate again. I have opted to go with a 5year ARM vs a 30year fixed do to the intrest rate is better and more affordable. What do you think of ARMs today and what advice can you give me.

Thanks you in advance for your time/

Joey<!-- google_ad_section_end -->

 

[Erik Sandstrom]

Hi Joey,
I've done many subordinations with GreenTree in the past, they don't have the best turn times but I have been able to get them done.

In regards to your question:
I am a fan of Adjustable rate mortgages because over the years they have consistently been low. Not to say that this can't change in the future, it very well could. But the ARM's are tied to a different index & margin which have remained somewhat constant even with the dramatic movement of the 10 year bond. That leads me to believe and has been proven in many cases where adjustable rates tend to adjust lower than their fixed rate after the 5 year fixed rate period.

ARM's have caps on how much they can rise after the fixed rate period as well a lifetime cap on the rate. Ex: starting rate 3.5 percent and has a cap of 5 percent on top of that, the highest the rate can go even if the market crashes would be 8.5 percent. Yes that is high but again that's if the worst case scenario happens. I don't predict that this will happen as it will cause a mortgage crash similar to what happened in 2006-2008.

There's many different reasons to go for an ARM:
1. If you have to go FHA, you may be refinancing again within 5 years before the new loan would adjust
2. Income levels will be increasing which will allow you to refinance to a fixed loan and/or pay more to pay the loan off
3. Not planning on staying in the residence for longer than 5 years
4. You want to gamble on what the interest rates will be in the future

If you go for a 30YR/Fixed, yes the payment will be higher but you will know what the payment will be throughout the term of the loan which can provide a sense of security. Many borrowers these days are afraid of adjustable rates because of what happened in the past with the negative amortization loans, sub-prime loans...etc.

If you want a breakdown of the difference between a 30YR/Fixed rate and a 5 year ARM I would be happy to provide that to you.

 

[Joeywah]

Yes please do tell me the breakdown difference between a 30YR/Fixed rate and a 5 year ARM. Also if this goes South would you be able to handle this for me?

 

[Erik Sandstrom]

I would love to help, shoot me an e-mail and I can give you a breakdown: [email protected]

 

[Erik Sandstrom]

Updated Guidelines for Refinancing a Loan Previously Modified:

If you are refinance a loan that has NOT been modified but you have modified a loan on another property there is no seasoning period before you would be eligible to refinance the loan that has not been modified.

Fannie Mae:

• Copy of the Modification Agreement to verify acceptable terms.
• Borrower had to make at least 24 timely mortgage payments based on the terms of the restructured loan

Freddie Mac:

• Copy of the Modification Agreement to verify acceptable terms.
• If the restructured loan resulted in Forgiveness of principal and/or interest on either the first or second mortgage, application of a principal curtailment by or on behalf of the investor to simulate principal forgiveness, conversion of any portion of the mortgage debt to a mortgage that is fully forgiven over a period of time or due upon the sale of the subject poperty (a "soft" subordinate mortgage), conversion of any portion of the original mortgage debt from secured to unsecured are Not Allowed.
• Restructured loans are Not Allowed on Open Access (Freddie Mac/HARP).
• Is the restructured loan resulted in rate reduction and/or extension of loan term, borrower bus have made a minimum of 24 months of timely payments.

FHA:

• The borrower had to make at least 24 timely mortgage payments based on the terms of the loan modification
• Copy of the modification agreement required on all transaction types to verify eligibility. Occupancy: The borrower will not be eligible for a new purchase transaction, until occupancy requirement has expired

 

[delta97]

Is the

Updated Guidelines for Refinancing a Loan Previously Modified:

If you are refinance a loan that has NOT been modified but you have modified a loan on another property there is no seasoning period before you would be eligible to refinance the loan that has not been modified.

Fannie Mae:

• Copy of the Modification Agreement to verify acceptable terms.
• Borrower had to make at least 24 timely mortgage payments based on the terms of the restructured loan

Freddie Mac:

• Copy of the Modification Agreement to verify acceptable terms.
• If the restructured loan resulted in Forgiveness of principal and/or interest on either the first or second mortgage, application of a principal curtailment by or on behalf of the investor to simulate principal forgiveness, conversion of any portion of the mortgage debt to a mortgage that is fully forgiven over a period of time or due upon the sale of the subject poperty (a "soft" subordinate mortgage), conversion of any portion of the original mortgage debt from secured to unsecured are Not Allowed.
• Restructured loans are Not Allowed on Open Access (Freddie Mac/HARP).
• Is the restructured loan resulted in rate reduction and/or extension of loan term, borrower bus have made a minimum of 24 months of timely payments.

FHA:

• The borrower had to make at least 24 timely mortgage payments based on the terms of the loan modification
• Copy of the modification agreement required on all transaction types to verify eligibility. Occupancy: The borrower will not be eligible for a new purchase transaction, until occupancy requirement has expired

Is the FICO score still need to be not lower of 620 in order to refinance HAMP modification?

 

[Erik Sandstrom]

Hi Delta,
FHA starts at 580-620 and has their own rules on previous loan modifications however you may have an ability. What I typically do is send in a copy of the mod agreement to my underwriting department to see if it's an acceptable mod for refinance and usually it is.

If you are looking for conventional, conventional follows the 2 year payment on time and it doesn't matter the mod rule. But they do require 640 credit score and ultimately you want to go FHA unless your score is 680 or above in most cases.

Let me know if there's anything I can do to help.

 

[mark smith]

Hi,
Great and valuable information Erik. Especially for those who have received just an interest rate reduction.
Thanks!!

 

[carolineallison]

Hi,
Refinancing is replacing your current mortgage with the new one that would have a lower interest rate, extended loan term or a lower monthly mortgage.
Thanks Erik for sharing the information.

 

[Erik Sandstrom]

Anytime, that's what I'm here for.

 

[AlyssaGarcia]

OK Team,
I just received a call back from my underwriting department regarding previous loan modifications on loans and the borrowers attempting to refinance under HARP, Conventional or FHA.

The big thing to watch out for is if you received a principal reduction, deferment or curtailment those loans are ineligible for submission. Why they are ineligible is because the payoff from the lender will be different from the unpaid balance.

GREAT NEWS!! If you ONLY received an interest rate reduction, term extension or past due payments pushed to the end of the term we may be able to help.

I know many of our borrowers have been turned away. I myself have even turned away homeowners with previous loan modifications. If you want to determine if your loan IS eligible for refinancing, my underwriting department has given me the ability to submit the modification agreement and they will come back and determine if the loan is eligible.

Do these rules apply to VA loans as well?

 

[Erik Sandstrom]

Yes, as long as you have remained current on your loan for the past 2 years we can refinance your previously modified loan. If you're seeking a VA Streamline refinance or converting your FHA/Conventional loan to VA please feel free to reach out. 619-379-8999

 

[STARTING OVER]

Yes, as long as you have remained current on your loan for the past 2 years we can refinance your previously modified loan. If you're seeking a VA Streamline refinance or converting your FHA/Conventional loan to VA please feel free to reach out. 619-379-8999

Hi Erik:

I'm in California. I have a first through Nationstar that was modified in 2009 and I've kept it current ever since. The balance on that loan is $259,474.12 and at 5.25% for the next 27 years. I have a second for $65,000 that was charged off on 4/19/13. I get monthly statements from them but that's it. My home is now worth about $400,000.00. Am I eligible in any way to refinance my first with Nationstar? Thanks for your help.

 

[Erik Sandstrom]

Hi StartingOver,
Yes, since your mortgage was charged off longer than 4 years ago you should be able to qualify for a new loan. As long as you fit the other criteria we should be fine. The automated underwriting system will also give us feedback as well.

Please feel free to reach out to me at [email protected]