Who’s Eligible for a Mortgage Loan Modification Under the Obama Rescue Plan?

The Treasury Department recently released its Home Affordable Modification Program guidelines.  The program is part of the Making Home Affordable initiative.  The guidelines include eligibility requirements to determine which homeowners qualify for relief under the plan.  The guidelines specify the following eligibility requirements:

• The mortgage must have originated on or before January 1, 2009.
• Home must be an owner-occupied primary residence.  This must be verified with tax return, credit report, and other documentation such as a utility bill.
• The home must be a single family, 1-4 unit property (including condominium, cooperative, and manufactured home affixed to a foundation and treated as real property under state law).
• Home may not be vacant or condemned.
• Borrowers in bankruptcy are not automatically excluded from consideration.
• Borrowers in active litigation regarding the mortgage loan can qualify for a modification without waiving their legal rights.
• First lien loans must have an unpaid principal balance (prior to adding arrearages) equal to or less than:

  1. 1 Unit: $729,750
  2. 2 Units: $934,200
  3. 3 Units: $1,129,250
  4. 4 Units: $1,403,400

• Foreclosure actions are suspended (not cancelled) during the trial period or while borrowers are considered for alternative foreclosure prevention options. If homeowners fail to qualify, foreclosure proceedings may resume.
• No minimum or maximum LTV ratio for eligibility purposes.
• Loans are eligible for only one loan modification under the program.
• Subordinate liens (such as second mortgages or home equity loans or lines of credit) are not included in the Front-End DTI calculation, but they are included in the Back-End DTI calculation. Back-End DTI is used to determine whether the borrower will be required to undergo credit counseling as a condition to modification.

Applicants will be accepted into the program only until December 31, 2012 (the program expiration date).

Program eligibility requirements are simply government guidelines. Guidelines may change and lenders might make exceptions if it is in their best interest to do so.

In other words, homeowners should not automatically count themselves out.  Anyone having trouble making the house payment  should explore the loan modification option.  Sometimes, the only way to determine whether you qualify is to apply.

Not all servicers, lenders, or investors are required to participate in the program at this time.  The program is designed for Fannie Mae and Freddie Mac mortgages, but the plan’s incentives may encourage servicers, lenders, and investors to modify other types of mortgages, as well.

The individual servicers that agree to participate in the program are required to sign a contract agreeing to abide by the program guidelines. If the servicer does not contract under the program, they are not eligible for incentive payments.

Homeowners should consult specialists (such as HUD Counseling Agencies) who work with lenders on a daily basis to review their situation and determine the likelihood of qualifying for whatever workout options are available through the lender.  Sometimes the only way to determine whether a homeowner qualifies is to submit an application.

Homeowners should explore all available options to save their home.

Tagged as: FHA Mortgage, Mortgage Modification, Obama Rescue Plan

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