Hey Matt, thanks for the comment -- actually, this program was signed into law last month as part of the American Recovery and Reinvestment Act of 2009 (but details weren't released until today). The vote coming up is to decide whether bankruptcy judges will have the power to modify mortgage loan terms -- we may hear by Thursday on that one.

Thanks for reading! --James Wirth

Hello Amit, thanks for the message -- as far as I can tell, Today's announcement centered primarily on the modification portion of the new plan, targeting approximately 4 to 5 million homeowners. The refinance plan (apparently targeting another 4 to 5 million homeowners) to my knowledge has not been implemented to the same degree. I think we're probably getting the information as fast as they can figure it out :-D Hang in there and hopefully we'll know more soon.

James Wirth

Amit, thanks for your comment -- based on the information you provided I do not see a reason why you could not refinance on your own if you qualify and the home value supports the scenario. The "Making Home Affordable" program is designed for those who are not able to qualify due to hardship or the loss of home value makes them ineligible, but you may not fall into those categories.

You can also ask your current loan servicer to consider a modification independent of the Making Home Affordable program, which may save you on the costs if they are able to offer it.

With regard to your question on PMI; I have seen only high-level details on this. My understanding is that if mortgage insurance is currently part of the transaction then they would potentially leave it on there; if it's not already on there than it 'may not' be required. That's specific to the Making Home Affordable program though. The general rule of thumb is if the 1st mortgage is more than 80% of the value, then mortgage insurance is required.

Hope that helps! --James Wirth

Gillian, thanks for the comment. I will check the Web site you mentioned -- I'd suggest caution at this point relying on a Web site that is not 'officially' tied to the program but any resource that provides additional clarification is certainly welcome and hey -- my blog is no more official than the site you mentioned! I'll definitely take a look.

James Wirth

Carolyn, thanks for the comment. In the immortal words of Forrest Gump, 'Momma says stupid is what stupid does....' the banks certainly hold their fair share of the responsibility for the current state of affairs, but it seems clear to them they have everything to gain from participating in the modifications.

My hope is that they will full cooperate, knowing that they are only increasing the likelihood that they avoid foreclosures. They actually have much more incentive to allow these sort of modifications because a lender in 2nd lien position typically gets absolutely nothing in a foreclosure.

One other thing we have going for us is that 2nd mortgage companies should soon be seeing a fair amount of temporary relief themselves based on 2nd mortgages clearly being in the 'troubled asset' categories. Of course, if it's a write-off because of foreclosure, the only relief there is tax relief and they probably aren't looking to avoid paying taxes on profit... or the lack thereof...

Let's hope the '2nd mortgagee' will realize they stand to benefit from this more than the 1st mortgage. It's probably too early to tell at this point because there are still a lot of kinks to get out before this program really gets off the ground, but so far my magic 8-ball says, 'The outlook is good!'

Thanks again for commenting!

Gholamreza Hooshmand:

The modification and refinance programs that were part of the stimulus package were for loans within the limits of the Fannie Mae and Freddie Mac loan limits, not jumbo loans. I hope the income you stated is your net income and you are able to scrape by; you may consider talking to a Real Estate Attorney in your area about your options. Best of luck to you.

Paul, many people share your frustration. The fact that you have PMI shouldn't disqualify you from participating; however, with a drop in value that is so substantial, I could see why this might be challenging.

Have you spoken with a HUD Counselor? 1-888-995-HOPE. They may also have information on the Hope Now program, which is an FHA program that contains an element that writes down a portion of your balance. They would know the qualifying but it might be worth looking into.

I wish I had better responses for your respective scenarios. Best of luck to both of you -- James Wirth

Leroy: One thing everyone is realizing is that there is still quite a bit to be sorted out on these programs. If you are able make your payments currently, my suggestion is to sit tight for a while so they can work the bugs out. From what I read about the modification program, being delinquent was not a requirement but I haven't heard of anyone actually being successful at this so I'm not surprised you received that message.

On the appraisal issue, there would need to be some way to verify or estimate the value; if it's that upside-down I could see why they are having an issue. As far as a procedure to dispute the value, I'm not sure they worked that in or if they did, I haven't heard anything about it. WIth that significant of a jump though it may take some time to sort through. You could try calling the HUD Counselor hot-line and ask them about a process of disputing the value. My guess is that someone is going to have to look into it, and as I said before, you may consider just sitting tight if it's not currently a financial hardship and let them work through the minutia of the program. I believe the refinance program is in effect until 2010 and the modification program 2012, so if rates hold relatively steady it seems like waiting might be the path of least resistance. Hope that helps! --James Wirth

Duane:

The issue of 'honesty' with regard to stated income loans is being hotly debated at present and we have just begun to scratch the surface. Countrywide specifically limits future refinance options on their loans if the previous transaction was a Countrywide stated income loan, and with regard to the Making Home Affordable plan it's quickly becoming one of the biggest issues. Hopefully this will be re-visited soon but for now it is an issue and you are not alone. I'm currently working on a blog entry just on the subject of stated-income loans, and I hope you will check back for more of my take on this.

With regard to the second part of your comment about whether there is benefit for you assuming they change the requirements on previously stated income and you qualify -- I do see benefit to the refinance, as long as you plan on being in the new loan for an extended period. Leaving the 2nd mortgage in place may not be ideal but there's still the benefit of converting your loan into a payment that includes a principal and interest payment for the same or less than your current interest-only payment; however, the real benefit there is only realized if you stay in the home (and the loan) for an extended period. Ultimately it comes down to a) qualifying, and b) your long-term plans.

Thanks for the comment! --James Wirth

Greetings all -- I just posted a separate blog on the topic of stated income loans and why homeowners shouldn't be disqualified from the Home Affordability initiatives. Here it is: http://activerain.com/blogsview/1037895/Should-Stated-loans-be-disqualified-from-the-Making-Home-Affordable-Program. Feedback is appreciated! --James Wirth

Frank, your concern is well-shared among many people I have heard from. My suggestion is to call the HUD Counselor Hotline at 888-995-HOPE and request their assistance. Countrywide, like many major lenders, are absolutely flooded with calls. My thought is that the squeaky wheel will get the grease. Good luck! --James Wirth

Rick, I don't think you're missing anything -- the program is, as you said, only concerned with the balance on the first mortgage. Problem is, I haven't been able to convince Countrywide that they are wrong about this or a number of other issues based on their interpretation of this program. YOu are certainly not the only person that has been turned away by Countrywide for something that very clearly fits within the guidelines of the program.

One question remains, however (and you may know the answer but I didn't see it referenced in your comments): Is your loan owned by Fannie Mae or Freddie Mac? If it's not, then you are at the mercy of Countrywide's own refinance program, which may have similar elements to the Making Home Affordable program but contain differences such as the issue you're running into.

If it is owned by Fannie or Freddie though, Countrywide appears to be incorrect. From the Refinance FAQ section under "Resources" on the makinghomeaffordable.gov Web site:

6. I have both a first and a second mortgage. Do I still qualify to refinance under Making Home Affordable?
As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible for a Home Affordable Refinance. Your eligibility will depend, in part, on agreement by the lender that has your second mortgage remain in a second position, and on your ability to meet the new payment terms on the first mortgage.

Here's the FAQ: http://www.makinghomeaffordable.gov/docs/borrower_qa.pdf

There is a progam that is starting to be made available to Loan Originators, which will allow you to circumvent Countrywide in the process... that is, if the loan is indeed owned by Freddie or Fannie. It's not widely available yet (I don't have it yet and we're pretty cutting edge), but it should be soon. Then you can go to someone else to originate the refinance for you. But if your 2nd is with Countrywide as I fear it might be, they'll still have to agree to re-subordinate.

You may want to call and talk to a HUD Counselor at 1-888-995-HOPE. My understanding is that they have a better grasp on the situation than Countrywide does. And if after you determine that the loan is owned by Fannie or Freddie and you want to push the issue with Countrywide, I suggest talking to your State Attorney General's office. There are too many people being turned away that should be eligible.

Hope that helps! --James Wirth

P.S. If you don't mind, please reply again with whether it's a Fannie or Freddie loan. Here's the address to find out: http://www.makinghomeaffordable.gov/loan_lookup.html

Thanks for the background Richard, I sympathize with your frustration and you are not alone. Lenders have been very slow to implement the program as written. It seems they are copletely overwhelmed and are, let's say 'prioritizing' in what appears to be a very discriminatory way.

If you are able to sit tight, I suggest giving it 30 days. More and more lenders are able to originate the HARP loans as refinances as long as the underlying loan is Fannie/Freddie. If you're in Washington State we can chat about it, or you may talk to someone such as Wells Fargo if you're not in Washington State.

The programs have been slow to roll-out. Hang in there. I would not recommend going delinquent on your payments in order to qualify, there's still no guarantee that they will execute the modification. I think more than anything else they're under-staffed and under-briefed.

--James Wirth

Amit, thanks for the positive feedback, that means a lot to me.

I wish I had even one success story for every 10 that have not yet been successful. There is much debate regarding the willingness of the 2nd lien holder (2nd mortgage) and whether they will agree to allow this program. The one success story regarding this that I've heard, had no problem with the 2nd lender agreeing.

Realistically it improves their chances of continuing to receive payment if the overall house payment goes down. So there's actually plenty of incentive for the 2nd mortgage company to participate in the program -- there's no additional risk, all they have to do is agree to be in 2nd position again. but actual subordinations happening -- I've only heard of one, and I don't believe it's completed yet, but the 2nd lender did agree to the change.

Regarding Countrywide, of course they're trying to get you to agree to their modification as opposed to losing the loan altogether. When it comes right down to it, I'd be very surprised if they received a re-subordination request on the 2nd loan and denied it. That said, much of their response has been very surprising.

I keep saying this, but hang in there. The more pressure they get to step up, but better the chance of reaching some resolution. I'm expecting some legal action or pressure from the government for compliance with the program, because so far there is very little (compliance that is).

-James Wirth

Jarred on the PMI, the only discussion I've heard around this was that if there was currently PMI on the loan that it would stay in place. Not sure why Wells Fargo is taking issue with this but they have been one of the more active lenders as far as their participation, it may just be an issue of figuring it out logistically.

The pressure is mounting for lenders to step up their participation, hopefully we'll see some resolution to this soon.

Thanks! --James Wirth

Paul, in some cases you can have your loan originated for the refinance version (e.g. not the modification), that is correct. Normal fees apply; having said that, I'm not sure you are able to get cash out as part of H.A.R.P. So that would be something you'd want to look into carefully. I don't have too many details about that particular program because it has not been made available to me yet. But I do know that your loan must be Fannie or Freddie-owned and you must be eligible. Outside of that, any lender participating in the program should be able to help you!

Also, as far as I've heard, the refinance program isn't allowing 40-year terms. A lot of the details of the two programs (loan modifications vs. refinances) have been co-mingled and I believe the 40-year term was available only as needed on the loan modification program.

One word of caution -- we have a small number of lenders originating these Fannie/Freddie H.A.R.P. loans. If you can afford to wait, it may be worth it to hold off for 30 days depending on what happens with the mortgage rate market, because as more lenders participate they will be required to be more competitive. From what I have heard, the loans being originated today are not as competitive as they could be.

You might also talk to another lender or two in your State regarding a cash-out refinance. Some lenders allow a higher LTV percentage, you may have some options there. Food for thought.

--James Wirth

Lisa, thank you for your comment -- I'm hearing this more and more, and I'm also hearing that 'major lenders' are pushing their own modification/refinance programs, even though they are supposedly 'participating' lenders.

There is also an issue of training on the modification program under the Housing Affordability umbrella. Case-in-point: HUD sent out a training schedule a week ago, discussing the "NEW" modification program. It has taken nearly 2 months to offer training and this training is for the HUD-approved counselors and the modification program details were released long before the refinance info became available. So, needless to say, it's going to take a while for these programs to be functional.

So hang in there everyone, we're getting there! --James Wirth

Thanks Richard, I see a number of things at work here --

1) lenders who are currently offering this are pricing very high, as you said. Current Fannie Mae rate after lender add-ons is more like 5%, not 6%. As more lenders flip the switch on this, the offered rate should go down;

2) lenders are still applying their own "overlays" that are making the program very prohibitive. Hopefully this will also go away once the program has gone more main-stream.

Very few of these seem to be getting done at this point. In fact, the only programs I hear of going through are the modifications that the lenders are offering on their own, not modification/refinances that are using the Home Affordability programs.

Thanks for the additional feedback on this! --James Wirth

To the unnamed commenter, you do sound like the ideal candidate for the refinance program; unfortunately the government is not compelling the lenders to participate, even if they say they are a 'participating lender.' Countrywide in particular seems to have put a number of lender "overlays" on top of the program that add qualification standards.

More and more lenders are offering the program to new applicants as a refinance -- once this becomes main stream you might have some additional options. For now, other commenters have reported very similar results to their requests for Countrywide to offer them a modification or refinance and we may need to sit tight a bit longer.

If you are ready to take action and press the issue, you may consider contacting a HUD Counselor at 1-888-995-HOPE and requesting that they review your situation; they are not able to compel Countrywide to comply with the program, but they may be able to offer counsel on other options. I'd also suggest contacting the Better Business Bureau and your State Attorney General.

Hope that helps --James Wirth

Amit, I would expect Freddie Mac to release the program that would allow you to use another lender; having said that, there's no way to know the timeline on that and we won't know where current rates will be at that time -- if the difference is .25% or less, you may consider taking it. I know that doesn't seem just, but 4.875% is a great rate and it would be very unfortunate for the market rate to be at 5.5% by the time Freddie Mac allowed you to use another lender.

I am also seeing some progress, but it's going to be an uphill battle. Hang in there! --James Wirth

Hi Sarah, I would guess there is some element that is limiting you from including the fees in the loan, such as the value Wells Fargo applying a value of $310K to the home, which would limit the maximum loan to $325K;

I'm not sure why the fees more than doubled -- I would guess you were mis-quoted the first time or they gave you that estimate without including property tax reserves or they were estimating the value too high. If you'd like to send me the Good Faith Estimate you were provided by Wells Fargo I'm happy to take a look as a courtesy: jameswirth@landovermortgage.com. Thanks --James Wirth

Sarah, I'm happy to help in any way I can. I don't blame you for being anxious... mortgages are very complex in and of themselves; add the additional layers of government subsidies, new, temporary programs, government spending to fund those programs, lender "overlays" that affect those programs... I'd say it's a full-blown debacle!

The good news: the dust is starting to settle and we should receive clarity soon. It's going to take some effort but I am confident we will get there.

Some of the confusion with regard to the 'costs' of the Home Affordability program is linked to there being two separate programs -- the modification program, and the refinance program.

1) The modification program, which would modify the loan to provide temporary relief targeting homeowners who are likely going to lose their home due to financial hardship such as job loss or income reduction or a substantial increase in their monthly payment due to an adjustable rate mortgage loan re-cast, and should offer lower costs;

2) The refinance program, designed to offer more flexible loan-to-value (LTV) qualifying standards for borrowers who have experienced depreciation in the value of their home but would otherwise qualify for a refinance. It is now my understanding that this program does not carry any sort of reduced costs, compared to a traditional refinance.

The modification program is not specific to Fannie Mae or Freddie Mac, the refinance program is only for loans owned by these two organizations, and the costs may vary depending on which organization owns the loan.

I know it's a lot to consider, and quite a bit is still up in the air. Our company is briefing us on the Fannie Mae version of the refinance program hopefully this week, which we will  be able to originate; Freddie Mac I believe is still requiring homeowners to go through their current loan servicing company to apply for the refinance.

The best advice I can give is to take your time, do the research, and consult with a trusted mortgage professional. We're out here!

Hope that helps! --James Wirth

Thanks Susan -- The Fannie Mae guidelines are now released on the structure for loans with PMI; having said that, we are waiting for the mortgage insurance companies themselves now to allow for a new policy at a higher LTV percentage than they currently allow. Over the past several months they have tightened their guidelines to make 10% the effective minimum equity requirement and the Fannie Mae guidelines require a new PMI policy that wouldn't be within PMI allowable limits in almost every case.

So there are still some elements to work through. I'm beginning to sound like a broken record, but hang in there -- they're turning the wheel, but it takes time to turn a ship this big --

Thanks for the comment! --James Wirth

Rebecca and LC: This is a common concern and I agree with you LC< we need to make these issues known. Here's my advice from a private email today with a very similar issue. In that case, the homeowner was told by their lender that the homeowner was required to participate in counseling before they could approve the modification and once the counseling was complete, they were denied:

"... the best piece of advice is that the squeaky wheel gets the grease. Tell them you want the modification and until they prove to you in writing that you are not eligible that you are not taking no for an answer. I suggest calling 10 times/day and requesting you talk to a supervisor every time. Be as aggressive as you can be (respectfully) with this because at this point not enough people are doing enough about their lender saying no when they should qualify. And there isn't any accountabilirty yet- there's no government worker that calls the lender and says, hey this application qualifies, why did you reject it?'

If they do provide you with something in writing, I would take that to your your state's representatives, to your local tv station's consumer investigation desk, your state's attorney general, everyone you can think of.

On the counseling, that's not because of credit it's because of debt ratio and it's a requirement of the program if your current ratio is too high. And some lenders are using that to put you off, hopng you don't go through with it so they don't have to do the work.

The bottom line is, the modification is going to cost the lender more than the incentives they will receive from the program. So if they think they can ovid it, they will. That is why a lot of people get nowhere with a modification until they are delinquent, and once they are approaching foreclosurena all of a sudden (sometimes) the lender gets serious about approving the modification. But keep in mind that in the three months that the program has been released, less than 50K modifications have been completed. That's less than 1% of the 5 million people the program was expected to be able to help. Also, this is the federal government going through a major leadership change in most of the key positions; and the lenders required to execute the modifications have been extremely close to the brink of financial ruin with the work falling on departments that are grossly understaffed handling a larger workload than ever before -- it's going to take some time to work through. I don't mean to downplay the irgency of your situation, only illustrate the magnitude of what is going on.

Unfortunately it's up to you to convince your lender you need help and if they won't help, to talk to everyone you can about putting pressure on them to change their mind.

Good luck and don't give up!!!"

PERFECT! --James Wirth

I agree with you Rebecca -- most lenders have their own programs and are not necessarilyacknowledging that you are asking for the Home Affordability Modification Program as opposed to their own. At this point they're doing anything they can to slow down the flow of applications. Hopefully the process will be refined and accountability added but in the mean time, everyone hang in there and keep trying!

Hi RIck from NH: have you checked Fannie Mae's site to find out whether it's a Fannie Mae loan? With Bank of America being the lender (I'm guessing Countrywide originated the loan?) I'd guess it's not Fannie Mae but if is then other lenders might be able to do the refinance (called DO Refi Plus) under H.A.R.P.

The other consideration would be to meet with someone in your state who could sit down and review your credit report to see if it's possible in the short-term to get the score up. That's the primary reason why the new offered rate was the same as your existing rate. It may be that there's just nothing that can be done immediately, but sometimes there is and it's worth having that conversation with credit report in-hand.

We are starting to see a small amount of traction with these programs. You're correct, it has been months; but hopefully this market can turn more quickly than the Titanic did and there's some hope left.

Thanks for your posts Rick --

Timothy, thank you for your comments. Please check back in and let us know once it's completed.

To all:

There's an important differentiation here -- most lenders have their own version of a modification program. It's very common for a homeowner to call their lender and say they want to apply for a loan modification and for the bank representative to have them apply only for the lender's internal program and not the Home Affordability Modification Program. 

If you are applying for a loan modification, it's crucial that you specify that you are very clearly applying for the Home Affordability Modification Program. This is the program that was enacted as part of the American Recovery and Reinvestment Act of 2009, that was announced 30 days after President Obama took office. Lenders typically will not enroll you automatically just because you request a modification program.

Thanks Timothy!

Zachary, if your loan is owned by Fannie Mae (go to www.fanniemae.com/loanlookup and answer the questions to find out), you may want to check with another and ask to apply for the DO Refi Plus program. It's an automated process once they have a complete loan application, and the automated system will determine whether a new mortgage insurance policy is required. If it's not, you can weigh the new interest rate with what you currently have to determine if the closing costs are worth the savings (typical closing costs will apply). --James Wirth

Brad, one of the most frustrating pieces of the Making Home Affordable programs is that the Private Mortgage Insurance participation has not been there. Because they are not government controlled, much of the benefit of the programs hinge on their participation and it seems that piece wasn't completely fleshed out. The assumption was the same as the assumption with the lenders -- that they would all willingly participate. Unfortunately, with mortgage insurance is involved it really muddies the water (even still, after this many months) and we're waiting for that piece to be worked through.

Kelly, you are not alone in your frustration. I'm surprised someone hasn't organized a country-wide 'Boston Mortgage Party' of sorts because many have posted similar concerns. The cost of the $7,800 upfront with no agreeement seems very extreme, however, and that's definitely not something that is allowable under the Making Home Affordable programs. Hopefully you didn't send that in.

Also, there has been a recent announcement to expand the current cap of 105% of current value to 125%. There is still much to be done but it's another step in the right direction. Here's the article: http://makinghomeaffordable.gov/pr_07012009.html.

To all: The best thing you can do is contact your state represntatives: https://writerep.house.gov/writerep/welcome.shtml

I've also just created a petition asking Congress and the Treasury Department to create a way for us to provide feedback and them to monitor lender participation. You can find the petition here: http://www.petitiononline.com/afford/petition.html

Responses to other comments:

Lara, a trial modification is part of the program, although I don't think it's being used is intended; many people are reporting that they are receiving nothing in writing during the trial and other goings on that really don't fit with the spirit of the programs;

Ann, only the note-holder could determine whether they were going to waive a pre-payment penalty. Home Affordable Modification Program itself is probably not going to remove a penalty, because the loan isn't being paid off, it's being modified. however, the program has urged lenders to allow flexible terms if a short-sale is involved, which might trigger a pre-payment penalty... I hope I am understanding your question correctly.

Dan, if you qualify for a refinance outside of the program, that's probably going to be the most beneficial option. If you don't qualify for a refinance 'on the street' so to speak, that's where these programs kick-in. And typically if you qualify for H.A.R.P., then you won't qualify for H.A.M.P., and the opposite is true as well.

I apologize for my delay in responding to your comments, please keep them coming! And I'll do my best to reply in a more timely fashion.

And please sign the petition and forward it on! We would need tens of thousands of signatures to be noticed. Thanks! --James Wirth

Hi Al, thanks for the post -- it seems that there are some complications that as of yet have not been resolved... they have revised the program to allow more flexibility for the program, however, at this point I'm not sure that the mortgage insurance companies themselves are willing to consider issuing a new policy to replace the old one (which is often the case).

I would highly recommend signing the petition I recently created and blogged about here. It's the best way I see to unite our voices to the point where they will be heard. You certainly are not alone in your frustration. Thanks! --James Wirth

Rebecca, you are asking very reasonable questions... unfortunately the answers I am hearing are not so reasonable. I have heard of similar instances where homeowners were rejected because they experienced loss of all income (which is one of the reasons homeowners ARE eligible according to the government site); and I have also heard of individuals being rejected by their lenders because they are not delinquent on their payments, also a contradiction on the official site. I'm honestly at a loss at this point, because either the lenders are able to add their own criteria or they are being provided with guidelines that are contradicting the official site. OR lenders have gone rogue and are making up their own rules and there is no check-and-balance to check it. Let's hope it's not the latter and that clarification will be provided at the Federal level to give us a clearer picture on what the eligibility requirements are.

Please hang in there, do exactly what you are doing and don't give up! And thanks for keeping us posted!

And every one, please sign the petition! www.petitionsonline.com/afford

--James Wirth

To answer your question directly about the two HAMP programs -- this is news to me. There have been a number of revisions to the program since it was originally launched, but my understanding was that there is one Home Affordable Modification Program, and a separate Home Affordable Refinance Program. But I haven't heard of two separate Modification programs until now. Thanks --

Rebecca, I agree -- there do seem to be different guidelines depending the underlying lender (Fannie Mae, Freddie Mac, others), AND the servicer (e.g. Wells Fargo, Chase, Bank of America, etc.). This adds an additional level of complexity that makes it more difficult for us to figure out. As far as the scenario with reserves, I just can't get my head around that.

Robert, sounds like there's some similarity with your question regarding reserves. As you will see from the comments posted on this blog, reserves do come into play as a determing factor. It seems that the general rule of thumb for the MHA modification program is that if you're delinquent on your mortgage you have a better chance qualifying even if you have reserves; if you're not delinquent on your mortgage, then having significant reserves seems to be a negative factor and might disqualify you.

I think the justification for this counter-intuitive stance is that they're trying to stop foreclosures and if you have gone delinquent on your mortgage, there really isn't a reason such as avoiding negative entries on your credit to avoid foreclosure or spend your reserves and you are much more likely to go into foreclosure, therefore they overlook cash reservies that might otherwise disqualify you. But if you haven't become delinquent, then they expect you will use cash reserves to avoid foreclosure and for that reason might disqualify you for the program.

To be clear, I am in no way suggesting that someone who is not late on their house payment should let themselves become late so they can qualify for the program. I'm just trying to work through the reasons behind some of the nuances in the program to hopefully help people qualify who need the program.

Hope that helps! Thanks for reading -- James Wirth

Hi Mickey, thanks for the post. I wish I had better news for you -- what you are dealing with is a stumbling block for many. The first mortgage lender is participating in the more flexible guidelines that are part of the MHA program, but the 2nd mortgage lender is not and and using their typical guidelines of a maximum of 90% combined financing.

There are additional phases of the program that have been announced, and it would be the lender servicing your current 1st mortgage that may allow a 'consolidation' of the two loans, once the program is released. Check back with them often, and I'll post anything I hear to my blog as well.

Thanks Mickey --James

Hello Mrs. Baer, thank you for taking the time to thoroughly explain the history of your challenges, I can certainly understand your frustration. It's very unfortunate you have been working on this for so long.

Your question regarding whether the loan must be owned by Fannie Mae or Freddie Mac -- No, that's not an automatic requirement for the Modification program as it is with the Refinance program (for the offical answer on this, use this link: http://www.makinghomeaffordable.gov/borrower-faqs.html#b1); however, I believe the underlying note holder (which sounds like Bank of New York) does have to be willing to allow the modification, it's not just up to the loan servicer (Bank of America).

There are many factors that go into determining whether you are eligible for a "Making Home Affordable" modification. The basic criteria are found on the government's Web site at http://www.makinghomeaffordable.gov/modification_eligibility.html. My suggestion would be to start here, there are only 5 questions, should take just a few seconds.

If that test indicates you may be eligible, then I would suggest contacting the Making Home Affordable contact you were given when you were working with the Consumer Assistance group, and requesting a reason for their denial. it could be that one of these eligibility requirements were not met or it could be that the scenario failed what's call a "Net Present Value" test, which is required by the government for homeowners participating in the program. Whatever the reason, you deserve an answer.

One final suggestion: if you pass the test on the making home affordable web site (the 5-question test I referenced above), remember that the squeaky wheel gets the grease. The departments handling modification requests are still being absolutely flooded with requests. While Bank of America has re-doubled its efforts to get an answer to everyone on modification requests, it's a daunting task at best and one that's being struggled with industry-wide. However, your issue is trying to keep your home, not worrying about whether loan servicers are over-worked, so... be the squeaky wheel, call every day 10 times per day, put your request in writing and make it known that you have cc'd your state's attorney general (and actually send it to the AG), write to your state representatives, multiple times and to every one of them even if you're not in their district (you can write a generic letter once and send it to everyone), contact your local TV station's consumer advocate representatives, whatever you can do to squeak as loud as possible. That's the best suggestion I can give you, I wish you the best and hope you are able to stay in your home. Thanks for the post --James Wirth

Rebecca, thank you for re-posting and I apologize for my delayed response.

I do not know of any reason why you cannot re-apply. In fact, I have heard a number of stories indicating that homeowners were initially denied for one reason or another and the re-applied and were approved for a modification.

You bring up an extremely valid point regarding the escrow account. You are being penalized for something others are not if their reserves are in an escrow account with their lender. The only thing that's not in your favor in this argument is that you're not required to use those funds toward your taxes and insurance, whereas when it's with the lender you don't have access to it. But that doesn't make your point invalid, just muddies the waters a bit...

The challenge is going to be reaching someone with your servicer that actually has the authority to make a reasonable decision, because the front-line reps certainly won't. But as you said, that's moot now because your delinquent on your payments and you now have no reserves. Keep a clear paper-trail to show the money went to your property taxes and not just out of your bank account parked in your sister's bank, and you have a very valid argument.

I would suggest going in with guns a'blazing though, putting your request in writing, contacting your state attorney general's office and requesting their participation and carbon-copying your lender in that correspondence. You might also reach out to an advocacy group if you haven't already and request their assistance; local television stations; the state government department that oversees banks for your state, your state representatives, etc.

I've said this before in my posts to the point where I'm now sounding like the squeaky wheel, but that's the idea -- squeak loud and often, it really seems to make a difference. Get their attention, and you'll get additional consideration.

Rebecca, as counter-intuitive as it sounds, the reserves you had and the fact that you hadn't been late on your payment both were not in your favor when it comes to qualifying for HAMP. Now that the situation has changed, I would absolutely re-apply.

I hope that helps! Thanks again for the update! --James Wirth

Hi Brett, thanks for the post, I appreciate you bringing this up and posting specific verbiage because we can then talk about it.

One key here is that specifically for the Home Affordable program, Wells Fargo will only refinance a current Wells Fargo-serviced loan, and the same goes for Bank of America.

Also, all of the messaging you referenced could be true for Bank of America as well -- if the customer chooses to build the costs of the refinance into the interest rate then there would not be any closing costs. I wouldn't recommend it however, and I am happy to provide a side-by-side scenario that would very clearly show the benefit of adding the costs to the loan balance and keeping the rate down. But I'm getting ahead of myself.

If your loan is currently serviced by Bank of America and you would like to apply for a Home Affordable Refinance, I'm happy to take care of this for you with no upfront costs. And we can explore whether rolling the costs into the rate or the loan makes more sense. No application fee and we typically don't use an appraisal on a HARP. I can be reached at 425-357-3062 or james.wirth@bankofamerica.com, let me know if I can help! --James Wirth

Hi Brett, thanks for the post, I appreciate you bringing this up and posting specific verbiage because we can then talk about it.

One key here is that specifically for the Home Affordable program, Wells Fargo will only refinance a current Wells Fargo-serviced loan, and the same goes for Bank of America.

Also, all of the messaging you referenced could be true for Bank of America as well -- if the customer chooses to build the costs of the refinance into the interest rate then there would not be any closing costs. I wouldn't recommend it however, and I am happy to provide a side-by-side scenario that would very clearly show the benefit of adding the costs to the loan balance and keeping the rate down. But I'm getting ahead of myself.

If your loan is currently serviced by Bank of America and you would like to apply for a Home Affordable Refinance, I'm happy to take care of this for you with no upfront costs. And we can explore whether rolling the costs into the rate or the loan makes more sense. No application fee and we typically don't use an appraisal on a HARP. I can be reached at 425-357-3062 or james.wirth@bankofamerica.com, let me know if I can help! --James Wirth

Hi Bob, thanks for the comment. To answer to your questions, 1) we're still waiting for borrower-paid MI to be eligible; 2) we don't have a timeline because the target dates are already past; and 3), the question regarding why it's so difficult to put this in place is a blog entry in and of itself but I'll answer it here for now --

This business of modifying the terms of an existing NOTE and insurance policy is at the center of why only certain loans are modify-able and others aren't. With Fannie Mae and Freddie Mac being government-controlled now (the timing of this change is paramount to the success of the Making Home Affordable Refinance program), it was reasonable for the government to make changes to these loans and that's why having your loan owned by Fannie or Freddie is required. That's also why there was a requirement for lenders to 'participate' in the program, because they had to agree to the changes as well -- needing government funds to satisfy requirements certainly helped encourage their participation...

The challenge for loans with PMI is that there's an insurance policy in-place, an entirely different issue altogether, overseen by an entirely different body of government, AND, that insurance policy is underwritten by one entity, backed by another, guaranteed by another, invested in numerous times by others -- all of whom have to agree any sort of change to the underlying policy.

Why is this not the no-brainer that you and I think it should be? If we're lowering the payment then we're reducing the risk, right? Well, yes that lowers one type of risk but another type - a really, really big one for mortgage insurance companies - is the percentage of the home that is being encumbered (the loan-to-value percentage, commonly referred to as LTV). I may be over explaining but please hang in there if this is too basic.

One reason why the MHA Refinance program is working is because Fannie and Freddie who own the notes on these loans are in effect, turning a blind eye when it comes to the current value of the home (e.g. we're not doing appraisals, we're just accepting certain indicators that the loan will be under 125% of the value based on automated guidelines). The insurance companies (PMI stands for Private Mortgage Insurance, emphasis on private) are under no obligation to automatically accept a scenario that would leverage the 'collateral' (our homes) well beyond their value. Because the insurance company has a much greater share of this new risk in that scenario than the lender does...

Here's an example, which might help understand the risk:

Let's say you bought a home for $200,000, two years ago. You put 5% down, the loan is for $190,000 and you have borrower-paid monthly PMI. That means the lender took out an insurance policy in your name, name the lender as the insured (you qualify for the insurance, but the lender is the one who has the policy).

The insurance policy says that the insurance company will insure up to 15% of the value of that home, if the lender files a claim against them. So the lender is on the hook for the first 80%; the mortgage insurance company is covering an additional 15%. Which, a couple of years ago that was ok because home values were increasing. Even if your loan balance remained the same, the value was going up, meaning more cushion and less liability for the insurance company.

Flash forward to today. The balance on the loan is now lower by let's say $3,000 to $187,000. The value of the home is now pegged at, let's say $175,000.

If the owner of this home then defaults and the home is foreclosed, the lender takes it to auction and sells it for $170K. The amount owed is $187K, meaning the insurance company is on the hook for the amount over 80% of the original price ($160K), up to $190K.

Now let's assume the owner was able to refinance that home using the MHA program, and increased the loan by $7K to cover the closing costs. Let's assume the PMI company plays along and allows this to happen with the original terms. If the owner defaults and the home is foreclosed, leaving a total amount owed of $194K. With the original terms intacct, the insurance company now is liable for a portion of that increase.

And this was one of the few loans for them that was actually performing! We're in a situation where that cushion of equity has been dropping much more dramatically than the scenario I just described for most areas. The PMI companies are experiencing very challenging times trying to keep their doors open because of the losses they are incurring. The 'cusion' in values they were expecting to have has completely evaporated and nearly every home they have insured is in the negative.

Enter the Making Home Affordable initiatives and we're now telling the mortgage insurance companies that we want them to further insure the homes they're already negative on, and they can either revise the existing policy (with the permission of all of those parties I mentioned earlier) or they can just go ahead and issue a new policy, which they know no one will want to underwrite, gurantee, back or invest in because it's going to be encumbered up to 125% of its value.

Apparently, somebody figured out who it can be done, now it's just a matter of implementing it. I can't honestly say where that hold-up is at this point, but my understanding is that nobody is able to lend on loans with PMI yet (often referred to as "Phase II" of the MHA Refinance Program). I assume because they haven't gotten the insurance piece worked out yet.

I do know this much -- the momentum is picking up, we're seeing good strides. Bank of America seems willing because we're funding MHA refinances for loans without mortgage insurance so I don't think we're the bottleneck; I would imagine it's the mortgage insurance/endorser/gurantor/underwriter/investor side that still needs to get worked out.

I'm sorry that was so dreadfully long, I'll work on revising it into a more succinct, concise blog entry that will hopefully be more palatable. In the mean time, the program has definitely been announced, and at this point I'm sure it's only a matter of time before it's finally available.

I hope that helps! --James Wirth

All good points Bob, Admitedly I possess only a rudimentary understanding of the issues and you could be right -- maybe the MI companies are pushing this forward as quickly as possible. It could be that the bottleneck is a collection/combination of the MI companies, the systems, the ramp-up time, etc.

One thing we can be reasonably certain of -- at this point it's inevitable. It's just a matter of timing.

I certainly understand where you are coming from as far as the lack of communication. This has been an issue from the beginning -- and it could be due to the possibility that this is so huge that there isn't one person that knows every aspect of all of the issues they are dealing with. That's not a good excuse, and many people called for a higher level of transparency for the program; however, just as the cry for higher accountability began to resonate loudly enough to have a real voice, 'phase I' began rolling forward with promises of Phase II to follow. I'd guess that just as the call is mounting again, we'll have phase II.

That doesn't help you now, I understand that, but hang in there Bob, we really should be just right around the corner. Thanks for the post!

Hi Chris, at this point all types of mortgage insurance are on-hold until they release the next phase of the program. No ETA on this unfortunately. Once it's rolled out we'll know more about the specific types of mortgage insurance that will be eligible.

If there's even a small amount of equity in the home or the possibility of bringing in funds to close and the current rate is 6% or higher, I would recommend looking at an FHA refinance. The savings might be there to take advantage of lower rates, it's just really tough to know when the next phases of the MHA program will be released.

Give me a call if you have any questions: 425.357.3062. Thanks for the comment -- James Wirth

Hi Jeff, the "hardship" consideration is only for the modification program, not the refinance option so you should be fine. If PNC is not your loan servicer, I would also call your loan servicer and see what they will offer.

Brian, thanks for the message and the chat on the phone today. As we discussed, you may ask them to increase the loan and give you $400 cash at closing as a way to keep all of the costs financed into the loan/not out of pocket. The $400 application fee is something that the centralized sales departments are required to collect and goes toward covering the costs of initiating a mortgage, locking the rate on the secondary market, etc.

On the retail side where I function, our program is a little different -- we collect for the appraisal and credit report fee upfront. Both are ways to off-set the costs of the process in the event the borrower decides not to continue with the loan application.

One the second issue, I don't believe there's a rat here, just a sales rep struggling to get what he is seeing on his screen to come through on the printed documents. Stay on them about making sure that what they're communicating verbally matches what's on the closing cost worksheet and don't agree to move forward or provide payment information until everything matches up. They'll get it worked out, thanks for your patience.

You mentioned no points -- if there's enough equity you might also consider financing discount points in exchange for a lower rate. Usually the "break-even" point (the point where the lower monthly payment saves you more than the upfront costs, even though they're financed in) is usually around 4-5 years for points. In this market, most of us are staying in our home for longer than that, otherwise we wouldn't be considering a refinance. The points may pay off in the long-run.

By the way -- Bank of America uses a "Closing Cost Worksheet" for upfront information, in lieu of the more technical "Good Faith Estimate." This is a business decision aimed to provide clearer information upfront so borrowers can make a more informed decision without getting bogged down by a highly technical document. The GFE is still part of the process, just happens a little later on)

Thanks for the posts! --James Wirth

Following is a private message I received, in its entirety:

Dear James,
Why isn't America being told the truth? NO ONE will qualify for HAMP because it is under the control of the INVESTORS (Communist China) and NOT the SERVICING COMPANIES as proposed. It is a SHAM, you know it, I for sure know it after 7 months Trial Mod only to find out rejected because of, get this "You don't meet INVESTOR GUIDELINES". America has been given a false ray of hope because HAMP is a HOAX, a SHAM, and as my real estate attorney explained to me "OBAMA political BS' designed to raise America's hopes, make him look good. In reality we are in a terrific economic slump, I don't care what the news trys to portray, housing values have declined where I am at by 20% in just the last 9 months - so sooner or later Washington, who definitely does not have my support after this HAMP SHAM, will have to realize actions, not words and false promises get results. I am not bitter, just very disappointed and have absolutely no trust in my elected officials - sad part is, I can't do anything about it and they spend all their time scratching each other's back while sticking a knife in ours! You probably won't post this because it says exactly what is happening and is the truth but I thought you should at least hear it from an actual user who has been deceived along with the other 9 million home owners facing foreclosure.
Sincerely,
Gary XXXXX

Gary, thanks for the message, I have not censored anyone's comments (well, except for one spam ad that was unrelated to the topic).

I'm sorry your trial modification was not approved, I can't imagine how frustrating it must be to spend 7 months hoping, working toward something that is going to make a real difference for your family.

One thing everyone agrees on is that the Making Home Affordable programs have been slow to implement and investor guidelines are just one of the issues. One challenge that was uncovered as the program was being implemented was that modifying an interest rate on a loan that had been securitized and invested in, opened up the modifying party to a potential law suit brought against them by the investors. The "investors" in this case might be a particular financial company, could be foreign investors, could also be your 401(k), your insurance company.

As far as Obama's hand in all of this, that's a complex issue. Some are calling the program a sham, others are saying he inherited a problem that began building over the past 8 years or even longer -- potentially the seeds were sewn before the dot com bubble ever burst. It could also be the natural balancing that follows a period of incredible economic growth.

Whatever the case, I would encourage you to make your voice heard. I'm honored by you contacting me, however the reach of this blog posting is limited. Here are a few recommendations:

~ Reach out to your government representatives on every level, they have become increasingly proactive on pushing for solutions on this topic;
~ Sign the petition I created at www.petitiononline.com/afford, which admittedly has had some difficulty getting off the ground but everything helps;
~ Contact the attorney general for your state to find out if they are pursuing any action and add your voice;
~ Contact your loan servicing company and find out the specifc reason for the rejection (the element of your loan that made the modification ineligible) and ask for a re-consideration, talk to the supervisor's supervisor's supervisor or contact the "Office of the President" for your loan servicing company);
~ Contact the actual investor (you may have to do some digging but this information should be accessible) directly if it's one institution that is the issue, and request re-consideration from them directly. 

I don't know if these steps will actually work, but I do know there are cases where people are being re-considered after they were initially or subsequently told they were not eligible.

Thanks again Gary, feel free to respond here with any additional comments. --James Wirth