DO YOU HAVE AN FHA LOAN THAT NEEDS MODIFICATION? NEW PROGRAM ALLOWS PRINICPAL LOAN BALANCE REDUCTIONS AND FIXED INTEREST RATES.
The following is general information. Steve Vondran practices real estate, bankruptcy and foreclosure defense and can be reached at steve@vondranlaw.com or (877) 276-5084. He helps homeowners in California and Arizona where he is licensed to practice law.
Effective August 15, 2009 HUD announced a new loan modification program that would allow homeowners with an FHA loan, who could not qualify for any other loan modification, to apply for a FHA HAMP program (making home affordable), that may allow borrowers with FHA loans to keep their homes and avoid foreclosure. The general details of this FHA loan modification program are as follow (additional terms and conditions may apply, please contact an Attorney or a HUD Counselor at HUD.gov)
BASIC QUALIFICATION GUIDELINES:
•(1) You must be at least 30 days late on your mortgage, but no more than 12 months delinquent. However, you cannot force a delinquency merely by failing to make loan or mortgage payments
•(2) Seasoning requirement: the FHA loan must be at least 4 months old
•(3) The property must be the primary residence of the borrower, owner-occupied and a single family dwelling 104 units
•(4) The borrower must currently be paying more that 31% of their gross monthly income toward their mortgage payment (front-end DTI more than 31% of their gross monthly income)
•(5) The maximum back-end ratio (ratio of all expenses against gross monthly income) cannot exceed 55%. So if you make $10,000 gross monthly income, you cannot have more than $5,500 in total debt following the loan modification
•(6) Your loan servicer must be FHA approved and participating in the program (note: the fha loan servicer can be incentivized up to $1,250 to provide you with the modification
DETAILS OF THE FHA LOAN MODIFICATION:
•(1) The servicer may write down your mortgage to 31% of your gross monthly income (so if you make $10,000 per month, and your current mortgage payment is $4,000, the fha loan servicer can write you down to $3,100 monthly payment - which payment will include TAX, INSURANCE, PRINCIPAL AND INTEREST). What they call "PITI."
•(2) The amount of principal that gets written down is placed in a HUD partial Claim account. The amount placed into the HUD account would only be payable by the borrower if the house is sold or refinanced or at the end of the HAMP modification term.
•(3) If you have a second mortgage, the second mortgage holder will have to agree to subordinate their lien to the partial claim of HUD in order for the modification to work
•(4) The interest rate on the loan will be a fixed interest rate.
•(5) Impounding for tax and insurance is required.
•(6) OTHER IMPORTANT FEATURES: THERE ARE NO MAXIMUM LOAN LIMITS AND NO MAXIMUM MORTGAGE AMOUNTS AS THE OBAMA MAKING HOME AFFORDABLE PROGRAM HAS, AND IN ADDITION, YOU DO NOT HAVE TO HAVE A FANNIE OR FREDDIE LOAN AS THE CURRENT HAMP PROGRAM REQUIRES.
•(7) There are no credit application fees, no costs for the program, no mortgage insurance premiums, and no appraisal required.
•(8) You will be required to submit true and accurate financials, and an affidavit of hardship (yes, a true hardship is required (loss of job, loss of income, divorce, medial issues, etc.)
•(9) GROSS MONTHLY INCOME: In determining your gross monthly the lender or loan servicer may consider many different sources of income such as: wages/salaries, overtime, commissions, tips and bonuses, pension income, retirement income, unemployment income and rental income.
BOTTOM LINE: The FHA loan modification program is pretty darn cool if you qualify. Contact HUD for more details, or contact an attorney to discuss your foreclosure defense case. More information on the underwriting guidelines for the program can be found here: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-23mlatach.doc
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