Monday, December 28, 2015

FHA-Home Affordable Modification Program guidelines

Below are some of the guidelines governing an FHA-HAMP modification. You don't have to really know all of this stuff, call me and I will tell you if you should be eligible and if you should be eligible, I will help you apply.  Rod Williams 615-850-3453.

Eligibility –
The Servicer of the modified FHA-HAMP mortgage must be FHA-Approved.
Eligibility –


The current mortgagor(s) on the existing FHA-insured single family mortgage must be identical to the mortgagor(s) on the HAMP mortgage, except as provided below.

All changes in ownership due to death or divorce of the current owners must be supported by legal documentation.

The existing FHA-insured mortgage is in default, but is not more than 12 full mortgage payments past due.  A default is defined as 1 payment past due more than 30 days.  For default calculation purposes, all months are determined to have 30 days.  For example, a mortgage due for the July payment is in default on August 1st.  
The mortgagor(s) must be an owner occupant, have sufficient resources to make the payment on the HAMP mortgage and continue to occupy the home.

A new mortgagor may be added to the HAMP mortgage, provided at least one existing mortgagor(s) is retained.

The mortgagor must not have intentionally defaulted on their existing mortgage.  (Note: Intentionally defaulted means the mortgagor had available funds that could pay their mortgage and other debts without hardship, but failed to pay).

Eligibility –
Existing Mortgage
Must be a FHA-insured single family mortgage (1-4 units).
Mortgages previously modified under HAMP are ineligible.
There is no net present value (NPV) test for eligibility.
Eligibility –
Maximum Mortgage
Not applicable.
Eligibility –
Modified Mortgage
The existing FHA-insured mortgage must be re-amortized to a 30-year fixed rate mortgage, and must be modified in compliance with all FHA Mortgage Modification requirements, except those specifically modified under the FHA-HAMP program.
Property Eligibility
The property securing the FHA-insured property must be the mortgagor’s primary and only residence; and only single family (1 to 4 unit) properties are eligible.
Interest Rate – Modified New Mortgage
The interest rate must be fixed and meet the guidelines in Mortgagee Letter 2008-21.

Current Loan to Value Requirements Mortgage 
Loan Purpose
FHA-HAMP mortgages are required to have a lower monthly principal and interest payment than the unmodified FHA-insured mortgage and are made without an appraisal. 
All existing subordinate financing must be subordinated to maintain the first lien priority of the HAMP mortgage.  For more information, please see ML 2003-19.
Credit History
No minimum credit score required. (Credit report is only used to verify recurring debts.)
Seasoning Requirements on the Existing Mortgage
The first payment due date must be at least 12 months in the past, and at least 4 full mortgage payments must have been paid.

Property Valuation
No appraisal required.
Trial Modification
The Mortgagee must place the mortgagor(s) under a trial modification payment plan for the modified mortgage payment prior to completing the FHA-HAMP.  The mortgagor(s) must have made the first three consecutive trial monthly mortgage payments on time before the FHA-HAMP can be completed, and a partial claim filed.
Documentation Requirements
The Mortgagee must obtain the following additional documentation:
To be considered for any of the loss mitigation options, the mortgagor must provide detailed financial information to the Mortgagee.
Every borrower and co-borrower must sign a hardship affidavit attesting to and describing the hardship.  The document to be used is available for download at:   
The Department has no objection to situations where a cooperative mortgagor provides complete financial information either written or during a telephone interview.  Regardless of how the mortgagor’s financial information was secured, the Mortgagee must independently verify the financial information by obtaining a credit report (the credit report is not used for credit qualification but Mortgagees are to use for determining indebtedness), and any other forms of verification the Mortgagee deems appropriate.
Underwriting Requirements - General
No Credit Alert Interactive Voice Response System (CAIVRS) review is required, but HUD’s Limited Denial of Participation (LDP) and General Services Administration (GSA) exclusion lists are still required checks for all mortgagors.
FHA-HAMP processing and underwriting instructions are described below. 
  • Where the mortgage is in default and no more than 12 full payments delinquent the Mortgagee combines a partial claim for up to 12 months of arrearages, foreclosure costs, and principal reduction with a modification.
  • Except for the new maximum partial claim amount calculation, the partial claim must meet the requirements of Mortgagee Letters 2000-05, 2003-19 and 2008-21.
The mortgagor may not be charged any additional costs for receiving this loss mitigation workout option.  On a cancelled foreclosure, Mortgagees are reminded that all such costs must reflect work actually completed to the date of the foreclosure cancellation and the attorney fees may not be in excess of the fees that HUD has identified as customary and reasonable for claim purposes. 

The financial analysis, Hardship Affidavit, and documentation supporting the decision to provide partial claim relief must be maintained in the mortgagee’s claim review file. 
Loss Mitigation – Priority Order
FHA-HAMP can only be utilized if the mortgagor(s) does not qualify for current loss mitigation home retention options (FHA Special Forbearance, Loan Modification and Partial Claim) under existing guidelines (ML 2008-21, 2003-19, 2002-17, 2000-05).  To qualify for the FHA-HAMP, Mortgagees must utilize its loss mitigation actions using the aforementioned priority order.
Underwriting –

Monthly Gross Income
The mortgagor’s Monthly Gross Income amount before any payroll deductions includes wages and salaries, overtime pay, commissions, fees, tips, bonuses, housing allowances, other compensation for personal services, Social Security payments, including Social Security received by adults on behalf of minors or by minors intended for their own support, annuities, insurance policies, retirement funds, pensions, disability or death benefits, unemployment benefits, rental income and other income.
Underwriting –
Front End Debt to Income Ratio
Front-End ratio is the ratio of PITI to Monthly Gross Income.  PITI is defined as principal, interest, taxes and insurance.
The Front-End ratio must be as close as possible to, but not less than, 31%.
Underwriting -

Back End Debt to Income Ratio
The Back-End ratio is the ratio of the mortgagor’s total recurring monthly debts (such as Front-End PITI, payments on all installment debts, monthly payments on all junior liens, alimony, car lease payments, aggregate negative net rental income from all investment properties owned, and monthly mortgage payments for second homes) to the mortgagor’s Monthly Gross Income.  This ratio must not exceed 55%.
The Mortgagee must validate monthly installment, revolving debt and secondary mortgage debt by pulling a credit report for each mortgagor or a joint report for a married couple.  The Mortgagee must also consider information obtained from the mortgagor orally or in writing concerning incremental monthly obligations.
Underwriting –
Subordinate Financing
Subordinate liens are not included in the Front-End ratio, but they are included in the Back-End ratio.
Underwriting –
Upfront Mortgage Insurance Premium
Not applicable.
Underwriting –
Annual Premium
Remains the same.
Underwriting -

Calculation of  Maximum Partial Claim Amount

The maximum one-time only principal reduction on the modification is determined by multiplying the outstanding principal balance of the existing mortgage as of the date of default by 30 percent reduced by (i) arrearage amounts advanced to cure the default for up to 12 months PITI and (ii) allowable foreclosure costs.  However, the actual principal reduction amount for a specific case shall be limited to such amount that will bring the mortgagor(s) PITI to an amount not to exceed 31 percent of gross monthly income.  Whether or not there are previous Partial Claims for a given case number, the arrearage component of this and any previous Partial Claims cannot exceed the equivalent of 12 months PITI and allowable foreclosure costs.  This 12 month PITI maximum is NOT affected by any payments that may have been made to reduce the partial claim mortgage balance.
Partial Claim Guidelines
No interest will accrue on the partial claim.  The payment of the partial claim is not due until (i) the maturity of the HAMP mortgage, (ii) a sale of the property, or (iii) a pay-off or refinancing of the HAMP mortgage.
In Foreclosure Process
To ensure that a mortgagor currently in the process of foreclosure has the opportunity to apply, Mortgagees shall not proceed with the foreclosure sale until the mortgagor has been evaluated for the program and, if eligible, an offer to participate in the FHA-HAMP has been made.  In the event that the mortgagor does not participate in FHA-HAMP, the Mortgagee must consider the priority order, outlined in “Requirements to Use FHA-HAMP” section of this Mortgagee Letter, prior to proceeding to foreclosure.
90 days Past Due
Ninety day past due mortgages must have been considered for all loss mitigation programs prior to being referred to foreclosure.
Mortgagees are required to escrow for mortgagors’ real estate taxes and mortgage-related insurance payments.
Unpaid Late Fees Waived
The Mortgagee will waive all late fees.

Credit Report
The Mortgagee will cover the cost of the credit report.

Mortgagor Cash Contribution
The Mortgagee may not require the mortgagor to contribute cash.

Monday, October 19, 2015

FHA Loan Workout Solutions to Avoid Foreclosure and keep your home.

If you  fall behind on your FHA insured mortgage, there may be options available that let you keep your house and avoid foreclosure. 
  • Reinstatement: If you have the money to do- if you win the lottery or your rich uncle dies and leaves you a lot of money, your lender will probably be willing to accept the total amount owed to them in a lump sum and reinstate the loan.  If you have most of what you owe,  they may combine a lump sum payment with a forbearance.
  • Forbearance: Your lender may allow you to reduce your house payments or suspend payments for a short period of time.  After that period of time however, the total amount that was not paid becomes due and then the lender will see which another option will bring your loan current.
  • Repayment Plan: You may be able to get an agreement to resume making your regular monthly payments plus an additional amount each month until you are caught up. There are both formal and informal repayment plans.
    • Informal plan is for a verbal agreement for a period of less than three months that will bring the payment current.
    • Formal plan is a written agreement that will bring the loan current and last for a period of from three to six months.
  • Mortgage Modification: If you are too far behind to catch up the loan in six months and do not have the cash to reinstate the loan you may be able to modify the loan. The lender may be able to change one or more terms of your original loan. He may be able to
    • Add the missed payments to the existing loan balance.
    • Changing the interest rate, including making an adjustable rate into a fixed rate.
    • Extend the number of years you have to repay the loan.
  •  Partial Advance: Consumers think of this as "moving the missed payments to the end of the note." In reality the way this is done is that the mortgage company files a claim with FHA for the missed payments and FHA makes the homeowners and interest-free loan which becomes due when the first mortgage is paid off.
These are the standard options. There are other options for those who may owe more on their home than what the home is worth. There are also options for those with a second mortgage. For more information talk to a HUD-approved housing counselor. Call me, Rod Williams 615-850-3453

Friday, September 11, 2015

Friday, August 28, 2015

The FHA-Home Affordable Modification Program (FHA-HAMP)

The FHA version of the Home Affordable Modification Program or HAMP, allows homeowners to modify their FHA-insured mortgages to reduce monthly mortgage payments and avoid foreclosure.

FHA-HAMP uses two tools to make the house payment affordable. One of these is a "partial claim" and the other is a modifications of the loan terms.

A partial claim is a claim the mortgage company files against the FHA mortgage insurance.  The way the public thinks about it and the way it is often expressed is that it is said the missed payments are moved to the end of the note. More than just the missed payments may be included in the FHA-HAMP. Under a FHA-HAMP, up to 30 percent of the unpaid principal balance as of the date of default may be included in the partial claim.

The modification of the loan terms involved two things. One, the loan is amortized to 30 years; that is, it is stretched back out to a thirty year note. The other thing is that the interest rate is reset to 200 basis points above the monthly average yield on United States Treasury Securities, adjusted to a constant maturity of 10 years. That is .2% is added to the yield of the "ten-year T bill."  This is a constantly changing number. At the time I am writing this it is 2.1807%. Add .200 to that and the interest rate should be 2.387%.

The goal of the FHA-HAMP is to get the loan affordable.  Affordable is considered 31% of the borrowers gross monthly income.

I am now working with a client who has a loan with an unpaid principal balance of $133,400.  If they got the maximum reduction under a FHA-HAMP, their payments would be reduced to $787.89 from a current payment of $1118.24. In order to be eligible they would need an income of $2542 a month.

There are various variables that may determine whether of not one gets a modification.  As a certified and experienced housing counselor with a HUD-approved agency I can increase your chance of getting approved. For more information, call me: Rod Williams, 615-850-3453.

Tuesday, August 18, 2015

Avoid Foreclosure Rescue Scams

To get help from a legitimate housing counselor who works for a HUD-approved Housing Counseling agency, call Rod Williams at 615-850-3453.

Monday, August 17, 2015

Bogus foreclosure rescue relief offers false HOPE

by Lisa Lake, Consumer Education Specialist, reposted from the FTC - What happens when you pay someone who says they’re going to help you, and they don’t? Well, in the case of HOPE Services, the FTC came calling.
Here’s the story: According to the FTC, a group of companies and individuals doing business as HOPE Services told consumers facing foreclosure they could get help from legitimate, government-backed programs, like Making Home Affordable —  but only after they made three monthly trial payments into a so-called mortgage lender’s trust account. Then, says the FTC, HOPE Services pocketed that money, while strongly discouraging homeowners from talking to a lawyer or to their mortgage lender. All this, even as homeowners faced foreclosure notices and hearings.
In the end, HOPE Services provided no help for these homeowners. Financially-strapped people lost almost $2 million. That forced some into bankruptcy. Some people, ultimately, lost their homes.
Look for these signs of this kind of scam:
  • “Guaranteed” fixes. No one can guarantee they can stop a foreclosure.
  • Fees up-front. Don’t pay in advance anyone who promises to stop a foreclosure or guarantees you a new mortgage.
  • Stop paying, stop talking. Avoid anyone who tells you not to pay your lender, or not to talk with an attorney or your lender.
  • Pressure to sign. Is someone rushing you, or asking you to sign over the title or deed of your house to someone other than your lender? Those are red flags.
Read more, if you’re worried about paying your mortgage. And if you think you’ve been the victim of a mortgage or foreclosure rescue scam, file a complaint with the FTC.

To get help from a legitimate housing counselor who works for a HUD-approved Housing Counseling agency, call Rod Williams at 615-850-3453.

Friday, August 14, 2015

Watch out for Rental Scams

Aside from fraud on the foreclosure side of the business, scammers are now targeting an already vulnerable segment - low income borrowers.

Scammers are creating websites that look official and are asking for (and getting) social security numbers and rent deposits and promising consumers they'll get on a Section 8 waiting list. Legitimate housing authorities do not ask for this information. 

For guidance in finding affordable rental call me: Rod Williams 615-850-3453. I am a certified housing counselor working for a HUD-approved housing counseling agency.

Monday, August 10, 2015

What is Cash for Keys?

If foreclosure is imminent, and you have worked with your lender to find a solution to your mortgage default that reinstated the mortgage and were unable to find such a solution that allowed you to keep your home and are considering a short sale or a deed in lieu of foreclosure, some lenders are willing to offer “Cash for Keys,” whereby the lender will actually pay you to vacate the home in a timely fashion. The money you receive in exchange is intended to pay for your relocation costs.

The reason mortgage companies are willing to do this that it is their best interest to forego the cost and time involved in carrying out a foreclosure. When the mortgage company agrees to give you cash to move out on a mutually agreed upon date, you agree to maintain the property and leave it in a “broom sweep clean” condition. Often the cash is paid upon or after exiting the property.

Mortgage companies do not have to do this and probably want even tell you about it unless you ask. If you trash the place, leave food to rot in the refrigerator or steal the appliances or are not out on the agreed date, you won't get the money. 

If you are eligible for the government Home Affordable Modification Program (HAMP), but are denied a loan modification or can not avoid losing the home, then you may qualify for the Home Affordable Foreclosure Alternatives (HAFA) program. HAFA options are the short sale, and the deed in lieu.  Short sale transactions are complex, involving coordination and cooperation among a number of various parties. Fortunately, the HAFA program simplifies and streamlines the process. If you do not cooperate in making the short sale happen, you won't get cash for keys. When you close, HAFA may provide $10,000 in relocation assistance but typically provides between $1,000 and $3,000.

FHA cash for keys may provide up to $3,000.  There is a limit on how much other cash one may have. If one has over $5,000 in cash at the time of the move out, the amount of money you get from cash for keys is reduced.