A new mortgage modification program has been introduced by the federal agency that oversees Fannie Mae and Freddie Mac loans. The new option is a replacement for the expiring HAMP modification program. Like HAMP, the new Flex Modification program is available to homeowners who have fallen behind on their mortgage payments.
The purpose of a loan modification is to reduce the monthly payment requirement, thereby reducing the likelihood of foreclosure. Even a modest reduction in the amount of each monthly payment can help a borrower remain current on payments. A loan modification is usually less costly than a foreclosure, benefiting both the homeowner and the lender.
The goal of the Flex Modification program is to produce a mortgage payment reduction of 20 percent. To be eligible for the program, you must have been in your current mortgage for at least 12 months. You generally cannot apply for a Flex Modification until you are at least 60 days behind on payments. Borrowers who are at imminent risk of foreclosure may apply sooner.
60 TO 89 DAYS IN ARREARS
If you apply for a loan modification before you are 90 days delinquent, you must submit a Borrower Response Package to your loan servicer. This packet of documents contains information such as the reason for the missed payments and your sources of income. However, a Flex Modification may be requested later without the submission of additional documents.
90 DAYS OR MORE IN ARREARS
A Borrower Response Package is not required if you are late on payments by 90 days or more when you submit your application. Instead, the Flex Modification provides a streamlined process for mortgages that are closer to foreclosure. For loans that are delinquent by 90 days or more, the loan servicer is not required to confirm your income or the reason for the missed payments.
A Flex Modification results in a lower monthly payment because the life of the mortgage loan is extended. The unpaid loan balance is made payable over a time period of 40 years from the modification date. There may also be a reduction in the interest rate. Regardless of which documents are required with an application, the payment reduction should be 20 percent.
Several governmental agencies play a role in regulating mortgage modifications. Because the rules for loan modification are clearly spelled out, you need to understand your rights before applying for a Flex Modification. Although the regulations are clear, homeowners sometimes miss out on loan modifications because of problems with their loan servicer.
UNCOOPERATIVE LOAN SERVICERS
For one reason or another, some loan servicers are uncooperative when approached about a mortgage modification. The mortgage industry is notorious for the amount of paperwork required from customers. Some loan servicers may have little financial incentive to follow through on mortgage modifications. In addition to unnecessary delays, you might encounter other issues.
Be careful of fees that seem to be unjustified. An excessive fee may be another tactic used by some loan servicers to make the loan modification process more challenging. Because your home is at stake, you may need to contact an attorney to ensure that your loan servicer handles your Flex Modification correctly.
You may have already been wrongly denied a loan modification in the past, perhaps during the time of the earlier HAMP program, If so, a legal remedy is available to recover your financial loss, along with attorney fees. The McGookey Law Office is experienced in bringing legal actions against lenders for such violations.
If your home has already gone into foreclosure, a request for loan modification may result in a temporary suspension of the process. Contact the McGookey Law Office in Columbus, Sandusky, or Lorain.