Is Loan Modification Possible? Let’s talk about HAMP

www.makinghomeaffordable.com info used for this article

Many homeowners are struggling to make their monthly mortgage payments on time perhaps because their interest rate has increased or they have less income.  A Home Affordable Modification through the Obama Administration’s Making Home Affordable Program will provide them with more affordable mortgage payments.

Eligibility

You may be eligible for a Home Affordable Modification if you:

• Own a 1-4 unit home that is your primary residence;

• Got your mortgage on or before January 1, 2009;

• Have a mortgage payment (including taxes, insurance, and homeowners association dues) that is more than 31 percent of your gross (pre-tax) monthly income; and

• Owe an amount that is less than or equal to $729,750 on your first mortgage for a single unit property (there are higher limits for 2-4 unit properties).

The Administration recently announced expanded flexibility to help homeowners who are unemployed or owe more than the current value of their home. And the Second Lien Modification Program offers homeowners a way to lower payments on their second mortgage when their first mortgage is modified through the Home Affordable Modification Program.

2nd Lien Modification Program (2MP)

Another reason many homeowners may be struggling to make their monthly mortgage payments is because they have a second lien.  Even when a first mortgage payment is affordable, the addition of a second lien can sometimes increase monthly payments beyond affordable levels.  Second liens often complicate or prevent modification or refinancing of a first mortgage.

The 2nd Lien Modification Program (2MP) offers homeowners a way to lower payments on their second mortgage.  2MP offers homeowners, their mortgage servicers and investors an incentive for modifying a second lien.  Servicers and investors may also receive an incentive for extinguishing a second lien, forgiving all of the debt a homeowner owes.

Homeowners must provide consent to share their first lien mortgage modification information with their second lien mortgage servicer, if they are different.  Since 2MP is meant to be complementary to the Home Affordable Modification Program (HAMP), a homeowner must have their first lien modified through HAMP before the second lien can be modified under 2MP.

Under 2MP, with their investor’s guidance, a mortgage servicer may:

• Reduce the interest rate to one percent for second liens that pay both principal and interest (amortizing);
• Reduce the interest rate to two percent for interest-only second liens;
• Extend the term of the second lien to 40 years;
• If the principal was deferred (through forbearance) on the first lien, a servicer must forbear the same proportion on the second lien;
• If the principal was forgiven on the first lien, in accordance with the Principal Reduction Alternative program, a servicer must forgive the same proportion on the second lien; although a servicer may, in its discretion, forgive a larger portion or all of the second lien and will receive incentives for doing so.

A second lien is eligible for 2MP if:

• the corresponding first lien has been modified under the Obama Administration’s Home Affordable Modification Program and the second lien servicer is participating;
• it was originated on or before January 1, 2009;
• it does not have an unpaid principal balance (at consideration for the modification) of less than $5,000 or a pre-modification scheduled monthly payment of less than $100;
• it has not yet been modified under 2MP;
• it is not subordinate to a second lien or is not a home equity loan in first lien position;
• it is not a second lien on which no interest is charged and no payments are due until the first lien is paid in full; and
• the second lien servicer is in possession of a fully executed 2MP modification agreement or trial period plan by December 31, 2012; or the second lien is not insured, guaranteed, or held by a Federal government agency (e.g. FHA, HUD, VA, and Rural Development).

List of Participating Servicers
Bank of America (including Countrywide)
BayView Loan Servicing, LLC
Chase (including EMC and WaMu)
Citi Mortgage, Inc.
Community Credit Union of Florida
GMAC Mortgage, LLC
Greentree Servicing, LLC
iServe Residential Lending, LLC
iServe Servicing, Inc.
National City Bank
Nationstar Mortgage, LLC
OneWest Bank
PennyMac Loan Services, LLC
PNC Bank
Residential Credit Solutions
Servis One dba BSI Financial Services
Wells Fargo (including Wachovia)

More servicers will be added in the near future as they join the program.

For additional information or with questions please feel free to contact James at 888.449.4052.