Loan Modifications

Written By: Glenn Michaels, Op-Ed Writer

For a long time under the Obama Administration mortgagor’s under certain conditions were able to apply for a mortgage loan modification. (HAMP) The HAMP program is actually called the Home Affordable Modification Program. 

I know a number of people that have benefitted by the HAMP program on a temporary basis. I benefited under the HARP program, Home Affordable Refinance Program. 

The HARP program is for borrower’s that were not delinquent on their mortgage and wanted to lower the interest rate and mortgage payment on a permanent basis. Using the HARP program I lowered my interest rate to 4.3625% from 6.375% and my monthly mortgage payment went down significantly for the mortgage loan term.

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A neighbor of mine took a HAMP loan who was delinquent and his mortgage rate was lowered to 2% for six (6) years. This temporary loan modification enabled the borrower to keep their home and to either sell their home or to refinance their current mortgage. If a borrower does not fall behind on their mortgage payment while in the modification program refinancing is an easy option.

 

Mortgage Services are making a lot of errors in administering the loans under the HAMP program. Below are some of the common errors:

•    Failure to process the application in a timely manner. Current rules requires a mortgage servicer to complete the loan modification within forty five (45) days. Most servicers keep asking for the same documentation over and over so the loan process exceeds the forty five (45) days.
•    Notify the borrower within five (5) days stating that the application is complete or incomplete. If incomplete the mortgage servicer must inform the borrower what is required to be a complete application.
•    A common error is telling borrowers that must be in default in order to qualify for a loan modification. This is not a requirement and very often a common error. To qualify for a HAMP you must either be delinquent of in danger of mortgage loan delinquency.
•    Asking borrowers for a low downpayment. Borrowers seeking a loan modification under HAMP should not have any required downpayment.
•    Self – employed borrowers after submitting their required financial statements are often requested to alter or change the returns. 
•    Failing to offer the borrower a Trial Loan Modification into a Permanent Modification, assuming you meet the rules.
•    Permanent Modifications that never take place even though the borrower met all of their obligations under the temporary loan modification. 
•    Transfer of Servicing while in a loan modification. The old mortgage servicer is suppose to inform the new servicer that the borrower is in a temporary or permanent mortgage loan modification. It is especially important if a borrower is in a temporary modification as the borrower will want to convert to a permanent mortgage loan modification. 
•    Any agreements or arrangements made between the borrower and old mortgage servicer must remain in effect with the new mortgage servicer. 

If a borrower believes the mortgage servicer is not following the HAMP rules they should consult an attorney to protect their rights.


About The Author

Glenn Michaels - As an NAMU® Opinion Editorial Contributor, Glenn Michaels is a mortgage underwriting instructor for CampusUnderwriter (www.MortgageUnderwriter.org). As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years. If you're interested in becoming a op-ed writer for NAMU®, please email us at: contact@mortgage-underwriters.org.


Opinion-Editorial (Op-Ed) Disclaimer For NAMU® Library Articles: The views and opinions expressed in the NAMU® Library articles are those of the authors and do not necessarily reflect any official NAMU® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMU®. Nothing contained in this articles should be considered legal advice.