FEDERAL HOUSING FINANCE AGENCY

QUESTIONS AND ANSWERS
BY FEDERAL HOUSING FINANCE AGENCY AND NATIONWIDE FINE HOMES

Q: What is a modification?
A: A modification is a change to the original mortgage terms. It may include a change to the product (an ARM to a fixed rate mortgage), interest rate, amortization term and maturity date, and/or unpaid principal balance. The change/s is made to create a more affordable payment for the borrower.

Q: What is a streamlined modification?
A: A streamlined modification is a modification that requires less documentation and less processing. In this case, the streamlined modification seeks to create a monthly mortgage payment that is sustainable for troubled borrowers by targeting a benchmark ratio of housing payment to monthly gross household income.

Q: Can I just call my bank and ask for help?
Yes you can but due to the fact lenders are getting as many as 6000 applications per week we find almost 100% of our customers get no where 3 months later. As an average we spend almost 60 hours to finish a file for a client who is current with its bank before we can get a significant term change. The biggest differnce between you calling your bank and professional assistance is you speak with the customer service representative at your bank whereas we speak with the investor behind your loan and negotiate with their underwriters directly.

Q: What is a different between me doing my application and having a professional team doing it?
A: Banks have professional underwriters on their side to evaluate your file. After all these are the same banks who gave you these loans and they are first responsible to their stock holders not to you.  Our job is to really evaluate your case and make sure you get the maximum reduction for the longest time. Further making sure what is offered to you has no hidden language as we find many customers are not fully aware of the banks sometimes misleasding legal language. An example of such may be hidden liens.

Q: What is the benchmark ratio?
A: This is the first time the industry has agreed on an industry standard. The benchmark ratio for calculating the affordable payment is 38 percent of monthly gross household income. Once the affordable payment is determined, there are several steps the servicer can take to create that payment – extending the term, reducing the interest rate, and forbearing interest. In the event that the affordable payment is still beyond the borrower’s means, the borrower’s situation will be reviewed on a case-by-case basis using a cash flow budget.

Q: Why is there not a foreclosure moratorium?
A: Any borrower who qualifies and responds to the servicer will be given the opportunity to provide the required information for consideration. If necessary, the scheduling of a foreclosure sale will be suspended. A suspension requires that the borrower maintain contact, desires to keep his or her home, has the ability to make the affordable payment offered, and promptly respond to requests for information and signed documents.

Q: Who is eligible?
A: The highest risk borrower, who has missed three payments or more, owns and occupies the property as a primary residence, and has not filed bankruptcy. The loan is a Freddie Mac, Fannie Mae or portfolio loan with participating investors. To qualify for the streamlined modification, the borrower must certify that he or she experienced a hardship or change in financial circumstances, and did not purposely default to obtain a modification.


Q: What if a borrower is not eligible but still wants to save his/her home?
A: If the servicer is unable to create an affordable payment with this streamlined program, it will further evaluate the borrower’s situation via the standard process. The standard modification program requires a personal cash-flow budget customized to the borrower’s situation.

Q: How many people will this help?
A: While difficult to assess, it is clear delinquencies are predicted to continue well into 2009. Foreclosure estimates are significant. Having a streamlined approach will assist many borrowers who default and more quickly. We estimate this will ultimately help thousands of borrowers.