HUD Secretary Shaun Donovan announced today the Federal Housing Administration has made changes to its loan modification program so that it will more closely match President Obama’s Home Affordable Modification Program (HAMP) under Making Home Affordable.  It is hoped that the new FHA mortgage loan modification guidelines will be in place by August 15th.

How does this help you?  Well, if you currently have a mortgage secured by the Federal Housing Administration (FHA), you will be able to significantly reduce your monthly mortgage payments, interest rate, and possibly achieve a partial principal forbearance or balance reduction (a decrease in the amount you owe on your mortgage), provided you meet the new guidelines.

Homeowners that have successfully gotten loan workouts through Obama’s Making Home Affordable Program have had amazing results, some decreasing their interest rates to as low as 2% on 30 and 40 year fixed loans, saving thousands of dollars each month on their mortgage.

This is a very exciting time for homeowners in FHA loans, as they now too can reap similar benefits.  The FHA –HAMP can be a little tricky, confusing, and there’s a good deal of gobbledy-gook out there on how to qualify.  We’re going to clear up the rumors, and help you understand how to get qualified, ModificationZoom style.

First we need to cross the “eligibility” bridge – Your servicer (bank) needs to be FHA-Approved to modify under FHA-HAMP.  Most major lenders that offer FHA loan programs are approved.  The easiest way to answer whether or not your lender can modify your mortgage under FHA-HAMP is to call and ask if they participate!  If your “mortgagee” (lender) is eligible, your next step is to make sure that you are eligible!

Your current mortgage must be an existing FHA-insured single family mortgage, and the existing mortgage must be in default, meaning that you are 1 payment past due more than 30 days, but less than 12 full mortgage payments past due.

Your property must be a FHA insured single family home (1-4 units), mortgages previously modified under HAMP are ineligible, you must have had the loan for 12 months, and here’s a great piece of information: There is no net present value (NPV) test for eligibility!

(The NPV test is used to determine whether it is cost effective for your lender to modify your mortgage.  Under this program, it doesn’t matter if it makes sense to your lender to modify your mortgage or not!  If you qualify, your lender should modify your mortgage, regardless of the amount of equity you have in the house!)

There is no maximum loan amount for mortgages eligible for modification, and it doesn’t matter what your credit looks like!  There is no appraisal necessary, and your FHA – HAMP modified loan is required to be at a lower interest rate and payment than what you currently have!

For documentation, you will need provide the following:

1)      Hardship Letter

2)      Income Documentation – Paystubs & W-2s, or Profit & Loss Statements & Full Tax Returns if you are Self-Employed.

3)      3 Months Bank Statements

4)      Financial Worksheet of Income & Expenses

5)      Hardship Affidavit – downloadable at: https://www.hmpadmin.com/portal/docs/mod_docs/hamphardshipaffidavit.pdf   

So what is going to happen when you get a mortgage loan modification through FHA – HAMP?   First, you will be placed in a trial modification payment plan, and after you make the first 3 payments under your new plan, FHA-HAMP can be completed.

Your mortgage will be modified to a 30 year fixed rate to a (proposed) front end DTI of 31%.  You must make sure that your back end (proposed) DTI is below 55%. 

What exactly does this mean?  Your “front end” DTI can be calculated by dividing your mortgage payment by your gross (before tax) income.  Your “back end” DTI can be calculated by totaling all of the monthly payments that show up on your credit report by your gross income – e.g. – credit cards, car loans, and mortgage payments. 

Conversely, to figure out what your new payment will be, simply multiply your gross income by .31!

Ok, I know that was a lot of information, so we’re going to summarize with a “To-Do List”:

1)      Make sure that you have an FHA loan, and that your Mortgagee (Lender / Bank) is FHA – Approved.

2)      Your mortgage must be at least 1 payment late, but not more than 12 payments late.

3)      Make sure your home is 1-4 units, that it is your primary and only residence, that you’ve had the loan for 1 year, and you haven’t previously modified under HAMP.

4)      Complete the hardship affidavit (link above), write a hardship letter, document your income, completed a financial worksheet, include bank statements and submit the package to your lender!

5)      Get your mortgage modified!

The rest of the information out there on FHA – HAMP is relevant, but not necessarily stuff that has to be understood to get a loan modification through the government initiative.  For example; your lender will determine how to get to the target 31% payment by giving you a 30 yr or 40 yr fixed term and the calculated fixed rate, and may have to lower your principal to help you qualify for the payment you need to be financially stable.  For more information, contact ModificationZoom toll free at (866) 760-9099.  ModificationZoom is not a Government Agency, but we do understand the ins and outs and loopholes of FHA – HAMP, and can help you.

Alright, now you’re ready to rock and roll with the FHA – Home Affordable Modification Program (HAMP).  It’s always been the goal of ModificationZoom to help homeowners get loan modifications on their own through good, truthful information.  If you are having trouble getting a loan modification on your own, and you want the very best loan modification possible, hire us!  ModificationZoom is the very best loss mitigation firm in the U.S., and we guarantee a successful modification or your money back!