The Flex Modification, which replaces the Home Affordable Modification Program (HAMP), is available to homeowners with a Fannie Mae mortgage. The Flex Modification will lower your mortgage payment by up to 20%, adds the past due amount to the unpaid loan balance and makes your loan current. Flex Modifications are not automatic and you will have to qualify to receive one just like you did the first time.

You may be contacted by various entities that want to "HELP" you get a loan modification. Virtually all of them charge an upfront fee that may range from thousand of dollars with no guarantee that you will actually receive the modification. You should avoid dealing with such people at all costs. They are out to take your money and not to help you. This is against the law (see MARS section).

Work directly with you lender, but be very leery of what they tell you. Keep in mind the the modification department and the foreclosure department have much different duties. Do not assume that they talk to each other. Your job is to work with both departments to know exactly what's going on. Don't take the Banks word for it, get in in writing. If they tell you they are delaying the foreclosure, verify that with the Public Trustee. There have been many instances of people who thought their foreclosure had been delayed or cancelled while they were working with their Lender only to find out after the fact that their home had been sold at auction and they had to move quickly.

Remember, the loan modification simply means to change or modify your original loan.

Example:

$200,000 Value of the home

$185,000 What is owed

$1,500 Monthly payment

10 Payments behind

$15,000 What is owed to bank in back payments

$2,500 Attorney fees

Call the bank and tell them you have one or two payments saved and that you want to do a loan modification. This means the bank will put the other eight or nine payments on the end of the loan, increasing your original loan by a few months in length or they will modify the loan from an adjustable to a fixed rate.

Typically the bank will require 1-2 of the back payments to be made plus all attorney fees. If you have not saved any of the money that was supposed to be used for mortgage payments, you would not be able to take advantage of this option.

Example:

10 payments behind at $1500 per payment. You pay 1 payment plus attorney fees.

Due to the bank is

$1500 X 1 = $1,500

Attorney $2,500

Total Due $4,000

Note: if you have late payment fees, back real estate taxes, unpaid association fees, property inspection charges or forced insurance that has been added to your payment, the bank will make you pay this at this time as well. Sometimes they will waive the late fees. You will end up paying $4,000 to get current and to get out of foreclosure instead or $17,500.

Remember this point

You can only do 1 loan modification per year. You can do a total of 4 over the length on the loan, but no more than one per calendar year. If you refinance with another mortgage company then the modifications you did with the current mortgage company will not count - a new mortgage company equals a clean slate.

With all of the Pandemic Relief bills in place the banks may be more lenient at this time.

The bank might ask for "Proof of Funds." This means you have to prove you have the $4,000 or proof that you are borrowing the funds, if so where are you getting the money from. The bank may ask for a copy of your last 12 months bank statements.

WHAT IS A TRIAL MODIFICATION?

The bank will put you on a "TRIAL MODIFICATION" this is when the bank puts you on a trial basis with the new payment that you qualify for. The trial period will last approximately 5-6 months. If you make all of the payments on time and I mean ON THE DUE DATE OR BEFORE...NOT ONE DAY LATE...then the bank will put you on a 5 year modification. After the 5 year period the bank will review your situation at that time. You must not miss any payments in the "Trial Period."

Once this is done, you are one step closer to keeping your home. If you choose this option call me for some FREE advice so I can help you with the process.