Homeowners, if you are likely to fall behind on your mortgage payments or are already behind, there is a test that most mortgage servicers now recommend that you follow that can help you stay in your home with smaller payments. The National Association of Realtors recently said on its blog that ninety percent of all loans are affected, but this is doubtful. No loans from Fannie Mae or Freddie Mac are included, and Fannie Mae and Freddie Mac invest in most homeowner loans. (There may be some confusion about this as Fannie Mae is managing the program but does not participate with loans in which it is an investor.)

However, with that said, it’s still worth seeking out your lender or letting a competent resource do so. There are ready-made search tools used by professionals who deal with the problems you face on a daily basis. You can contact your lender and ask if they are part of the HAMP program. Hopefully you’ll reach out to a knowledgeable person or contact me and I’ll find out for free. I have internal searches for loans from Freddie Mac and Fannie Mae. All you need to do is give me your address. If you call your lender, give them your loan number. If it’s not a loan from Freddie Mac or Fannie Mae, you’ve just removed the most formidable stumbling block.

If the loan servicer is part of the HAFA program, you are entitled to receive an application from HAMP to apply and must consider and provide a determination within 30 days. The requirements your application must show in order for you to qualify to enter a three-month trial modified payment program as the first step toward permanent modification. Please note that this program is only available to homeowners who live in the home:

• Your current monthly PITI (including flood insurance, if applicable, but not mortgage insurance) must be more than 31% of your gross income
• Reducing your payment by what is called a multi-method cascade should be able to achieve a reduction so that PITI (including flood insurance, if applicable, but not mortgage insurance) can be reduced to 31% of your verified gross income.
• The waterfall involves first lowering your interest rate in 1/8th of 1 percent increments until you reach 2%.
• The second way is to increase your amortization period at the rate of 2% to 40 years. Otherwise, the lender may forgive part of the balance or charge interest on a reduced balance, but rewrite the loan so that there is a balloon payment at the end.
• However, all of these alternatives are subject to tests that the FED has provided and that are only available to lending institutions. Statistically compares the commitments they are considering when making loan modifications to a projected experience factor if they don’t, which may imply the possibility of foreclosure. This is called the Net Present Value (NPV) test. Lenders typically lose up to sixty percent of your loan balance when all is said and done if the property goes into foreclosure, including legal fees and property disposition costs if they are unable to obtain a satisfactory price at auction. of foreclosure, which is often the case. The Associated Press wrote in the papers on May 18 that about half of the amendment applicants are being turned down. What follows is HAFA, the simplified short sale process.

Why choose a HAFA short sale over foreclosure?

• In most states, foreclosure means the homeowner will have to pay the deficiency. For example, if the loan balance is $100,000 and the lender only recovers $40,000 of the property after all expenses. The deficiency is $60,000 and lenders will typically aggressively try to collect on the deficiency for up to ten years before writing it off.
• Better chances of getting a new home loan sooner. Fannie Mae provides 2 years eligibility for a new loan for those who short sell, but 7 years for those who went through foreclosure or deed-in-lieu of foreclosure. Credit bureaus do not have a derogatory category for short sale, so according to HAFA, the creditor reports that the loan was paid in full for less than the full amount, which is not such a derogatory report. Of course, all previously reported late payments remain on the record and are usually the worst part of the report.
• With HAFA, the lender provides money for you to move, $3,000. And they provide money to help your real estate broker negotiate a payment on your minor liens, like a second mortgage, up to $6,000. This is a great help since it is your real estate agent who normally has to negotiate with subordinate lien holders. Before HAFA, they were often simply untradable and the short sale could not continue. Under HAFA, neither the first mortgage lender nor the subordinated lender can go after you for a deficiency judgment, so it’s as if the first mortgage lender is paying off your subordinated loan and to the extent that it’s not, he’s still making them pay for it. agree to waive their right to enter a deficiency judgment against you. Think of a rich guy who pays his debt and makes the lenders promise that they won’t bother him for any unpaid debt.
• With HAFA, the FED pays an incentive to your loan servicer and the actual lender calls the investor to agree to the short sale. Typically, the investor and manager drag their heels and make the short sale slow or fail because they have no incentive to help you.
• In HAFA, the Servicer must agree on a sale price early in the process (within the first 30 days) if the borrower goes through the HAMP step. If the borrower goes directly to a short sale, called an alternative HAFA, the servicer must decide within 30 days.
• HAFA requires that a real estate licensee handle the sale and that the owner not participate in the real estate commission, that the buyer is not related to the seller.
• A new feature has just been added to HAMP for unemployed people today, which will provide up to 3 months of grace and/or reduced payments related to unemployment. I should write more on this topic soon. Stay tuned for my next article.