Streamlined Loan Modification Program Frequently Asked Questions:
Important Bulletin: December 14, 2016 – In Single-Family Seller/Servicer Guide (Guide) Bulletin 2016-22 [PDF], Freddie Mac announced the new Freddie Mac Flex Modification, which is designed to offer you an easier, flexible way of helping more borrowers qualify for a loan modification in a changing housing environment. Please visit Freddie Mac's new Freddie Mac Flex Modification webpage for modification information and reminders or refer to the Freddie Mac Flex Modification Term Sheet.
The Federal Housing Finance Agency announced plans for a New Streamlined Modification Initiative that took effect on July 1, 2013 and was originally set to expire August 1, 2015. It was since extended to expire on December 31, 2016.
The Streamlined Modification program was designed eliminate hardship and financial paperwork and time to review those files while qualified borrowers only need to make three payments in a row on time to have the mortgage permanently modified.
What is the Streamlined Modification Initiative?
The Streamlined Modification Initiative was designed with the purpose of helping to assist more borrowers and homeowners who have mortgages which are either owned or guaranteed by Fannie Mae or Freddie Mac to maintain their homeownership. With its foundation rooted within lessons learned from the Servicing Alignment Initiative (SAI), a strong effort was made to help encourage borrowers to reach out and engage with their mortgage servicers in order to obtain a successful modification solution.
Under the new initiative, borrowers who were at least 90 days delinquent would be sent a Streamlined Modification Solicitation Offer that included a Trial Period Plan which specified the dollar amount of the newly adjusted proposed mortgage payment. This figure was based upon a fixed interest rate and extended the payment terms to 40 years while also providing principal forbearance for certain homeowners who had properties that were worth less than they owed (or underwater). And to speed up the entire process, the financial and hardship paperwork was not required of borrowers in order to receive the modification. This also eliminated the need for that paperwork to be reviewed, and the time it once took for that process to complete.
Our Tampa loan modification attorneys helped play a key role in the process by helping negotiate the terms for our clients and were even able to help many of them discover ways to help their case even further, while also making sure the lenders weren't cutting any corners on their end of the deal as well.
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Why did the FHFA direct Fannie Mae and Freddie Mac to launch the Streamlined Modification Initiative?
The financial crisis has been challenging enough for all parties involved. One of the most difficult of those challenges was the ability to assist troubled homeowners in the document collection process. The Making Home Affordable (MHA) program gave the FHFA, Fannie Mae and Freddie Mac a chance to measure and monitor responsiveness of borrowers and servicers in order to try and understand why so many borrowers have been unable to get a loan modification. It was the collective belief that by removing the administrative barriers associated with the document collection process, more borrowers would be able to access options enabling them to remain in their homes.
When was the Streamlined Modification Initiative available?
The program began on July 1, 2013 and was originally set to expire on August 1, 2015, and then extended until December 31, 2016. Both Fannie Mae and Freddie Mac distributed guidance to mortgage servicers in order to help them better implement the new initiative.
Were there any eligibility requirements?
There were some necessary requirements to be met in order to qualify for the new initiative with the primary factor being that borrowers must have had a loan which was guaranteed by either Fannie Mae or Freddie Mac. As a homeowner, they must have fallen within a 90 days to 24 months window of delinquency. A first-lien mortgage that was at least 12 months old with a loan-to-value ratio equal to or greater than 80% was also required.
Check with Fannie Mae to see if your loan is guaranteed through them.
Check with Freddie Mac to see if your loan is guaranteed through them.
If youhad a loan which had been modified at least two times in the past, you would not be eligible for the new initiative.
How was the new Streamlined Modification Initiative different from other Fannie Mae or Freddie Mac mortgage loan modification programs or options?
During the Servicing Alignment Initiative of 2012, Fannie Mae and Freddie Mac announced a Standard Modification program that became successful during that time and that factor is part of the reason why the Streamlined Modification program was built upon it. Servicers were required to send a Streamlined Modification Solicitation Offer to borrowers who were at least 90 days behind and met the eligibility requirements starting on July 1, 2013.
However, one key difference was the elimination of the need for borrowers to document their hardship or financial situation. Homeowners only needed to make just three trial payments successfully in a row and agree to the terms for their mortgage to be modified.
Furthermore, to add extra incentive for borrowers to work with their servicers and also take the extra step to document their financial situation, more favorable and beneficial terms were also available. Our Tampa Loan Modification attorneys helped many clients successfully negotiate through the process to help them achieve better results.
So how did the Streamlined Modification Initiative differ from the Home Affordable Modification Program (HAMP)?
Homeowners could take advantage of HAMP as soon as they ran into financial troubles, however, they were required to provide financial, income and hardship documentation to their servicer in order to be considered for the program. This took a considerable amount of time to prepare and submit, and even more time for the review process to complete. With the new Streamlined Modification Initiative, borrowers were not required to provide this documentation and the loan modification process began much faster. However, borrowers must have been at least 90 days delinquent to take advantage of the streamlined process.
HAMP enabled mortgage servicers to evaluate the borrower for modification terms based on an affordable payment which was 31% of the borrower's gross monthly income and HAMP also provided for a more affordable monthly payment than the Streamlined Modification Initiative and in some cases, borrowers were even eligible to receive financial incentive payments under HAMP.
Did all delinquent borrowers with Fannie Mae or Freddie Mac mortgages receive a Streamlined Modification Trial Period Plan after July 1, 2013 if he or she was 90 days or more delinquent?
As of July 1, 2013, mortgage servicers were to identify eligible borrowers who were at least 90 days and up to 24 months delinquent and then send them an offer letter that states the terms of the modification, including the monthly payment required for a Streamlined Modification. Any eligible borrowers were able to accept the Streamlined Modification Trial Period Plan simply by sending the specified payment to the loan servicer.
How long did the Streamlined Modification Trial Period Plan last?
Similar to a Standard Modification, the Streamlined Modification Trial Period Plan lasted for three months. The borrower typically only needed to make just three payments in a row, on time during the trial period after meeting necessary qualifying criteria and simply accept and sign the agreement in order to make the terms of the Streamlined Modification permanent.
What happened if a borrower missed a payment during the Streamlined Modification Trial Period Plan?
In the unfortunate event that a borrower would miss a payment during the Streamlined Modification Trial Period Plan, they would no longer be eligible for a permanent Streamlined Modification. However, there was still a bit of recourse as the borrower was still permitted to submit a Borrower Response Package to the mortgage servicer which would give them an opportunity to be evaluated for additional alternatives to foreclosure and any other potentially available loan modification options.
If a homeowner was already struggling, should they have waited until the Streamlined Modification Initiative took effect on July 1, 2013 to contact their servicer when they miss a payment?
For any borrowers who were struggling to make their payments, it was generally accepted that mortgage servicers would be able to better assist them in finding the most appropriate alternative to foreclosure the sooner they were contacted in order to explain the hardship. Our foreclosure defense attorneys were available to help represent our client's best interests based on their situations and worked hard to ensure they received the best possible arrangement available. Documenting their financial situation helped the servicer evaluate them for alternative modification options with more beneficial terms.
If I was late on my payments, when should I have expected a letter from my servicer?
Beginning on July 1, 2013 servicers were required to begin evaluating borrowers for a solicitation. The time it takes for clients to receive their letters may have been impacted by the volume of delinquent borrowers as well as the capacity and systems of the servicer at the time. Most borrowers should have received their letters within a timely period.
Were there any steps being taken by Fannie Mae and Freddie Mac in order to help discourage people from strategically defaulting in order to get a Streamlined Modification?
Anytime a new program or initiative is implemented, certain steps are usually taken in order to ensure the resources being provided aren't taken advantage of and manipulated by those who aren't truly in need, in order to make sure more resources are available for those who need it the most. With the Streamlined Modification initiative, Fannie Mae and Freddie Mac were relying on existing proprietary screening measures in order to try and circumvent any strategic defaulters from taking advantage of the program.
As an additional safeguard, only borrowers who had loans more than 12 months old with a mark-to market loan-to-value ratio greater than 80% were eligible. Anyone with two or more previous loan modifications was disqualified from participating as well.
Was there a reason why eligibility is being limited to borrowers who have missed three or more monthly payments?
Research showed that many borrowers who missed just one or two payments had a temporary hardship and they were often able to reinstate their mortgage to current status. Because of this, a choice was made to target borrowers who were at least 90 days delinquent.
If you are a borrower and you're facing a permanent hardship, but you're not yet 90 days delinquent, you should consult with a skilled foreclosure defense attorney and arrange to submit a Borrower Response Package to your servicer in order to be evaluated for mortgage loan modifications and other alternatives to foreclosure.
What if I had a second home or investment property through Freddie Mac or Fannie Mae that's become delinquent, did I still qualify?
Yes! Any delinquent borrowers with Fannie Mae or Freddie Mac mortgages secured by second homes or investment properties were eligible to participate in the Streamlined Modification Initiative and may have received trial period plan offers as long as they met the other eligibility criteria discussed above.
The Tampa Loan Modification Attorneys and Foreclosure Defense team at Fernandez Law Group are here to work with you to determine your best options and help you negotiate with the servicer to more acceptable terms. If you're facing foreclosure, we strongly encourage you to call one of our Tampa attorneys today at 813-489-3222 for a FREE consultation.
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Content authored by Gaston Fernandez
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