Do I Qualify For Loan Modification? The New Homeowner Affordability and Stability Plan

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I’ve been reading through the details of the new Homeowner Affordability and Stability Plan, which is letting lenders modify mortgages as of March 4th. Most of the information is collected here, where you can find a fact sheet, a two-page summary of modification guidelines, and the 17-page full list of guidelines.

Eligible borrowers can either refinance into a new, more affordable mortgage, or obtain a modification of their existing loan. Your existing mortgage must have been originated on or before January 1, 2009. I’ve tried to briefly summarize the rules below.

How do I qualify for a refinance?
The Home Affordable Refinance program will be available to 4 to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac. Normally, these borrowers would be unable to refinance because their homes have lost value, pushing their current loan-to-value ratios above 80%. Under the Home Affordable Refinance program, many of them will now be eligible to refinance their loan to take advantage of today’s lower mortgage rates or to refinance an adjustable-rate mortgage into a more stable mortgage, such as a 30-year fixed rate loan.

How do I qualify for a loan modification?
Borrowers who are struggling to stay current on their mortgage payments may be eligible (even if they are not currently behind on payments!) if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default. This may be due to several factors, such as a loss of income, a significant increase in expenses, or an interest rate that will reset to an unaffordable level.

In general, you may qualify for a mortgage modification if (a) you occupy your house as your primary residence; (b) your monthly mortgage payment is greater than 31% of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits.

How will my existing loan change?
The modification sequence requires first reducing the interest rate (subject to a rate floor of 2%), then if necessary extending the term or amortization of the loan up to a maximum of 40 years, and then if necessary forbearing principal. Principal forgiveness or a Hope for Homeowners refinancing are acceptable alternatives.

I think I’m eligible! How do I start the process?
Gather up your income documentation (paystub, your most recent income tax return, all mortgage documents, and all information on all debts like car, student, or credit card loans. Then contact your lender or HUD-approved counselor and ask to be considered under the Homeowner Affordability and Stability Plan.

It would seem that a lot more people might be interested in the refinancing aspect of this plan. I don’t qualify for a loan mod, but am certainly above 80% loan-to-value. However, I doubt my rate can get much better. The main obstacle is to find out if you indeed have a Fannie or Freddie loan. I wonder if the closings costs will be subsidized – they mention that appraisals would be waived in some cases.

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  1. Mark Bustamonte says

    Very informative article. It is important that before you apply you make certain you understand the requirements.

  2. Hmmm, I wonder if there is an easy way to determine if Fannie or Freddie has your loan?

  3. To determine if Fannie or Freddie owns your loan, call your lender. They’ll be able to tell you.

    You can also submit a form on Fannie and Freddie’s sites to check whether if they own your mortgage.

    Does Freddie own your mortgage?

    Does Fannie own your mortgage?

  4. VicfromATL says


    “It would seem that a lot more people might be interested in the refinancing aspect of this plan. am certainly above 80% loan-to-value”

    I’m in the same boat..let us know what you find out.

    I have mortgage with Countrywide, how can I tell it’s with Fannie M or Freddie M?



  5. Vic – Contacting your lender and/or servicer is probably your most reliable bet. Otherwise, try the helpful links that David provided above (I just approved the comment).

  6. I have a monthly mortgage of $1,200. My monthly income has dropped from $3,500 a month in 2008 to $1,000 now. I seem to fit all criteria of the program. Does that mean I could qualify for a new loan with a monthly repayment of $310? What happens if I find a better paying job at the same level at my former salary after refinancing? This is all hypothetical but you see where I am getting at…

  7. I am wondering what happens if someone has lost their job and is paying their mortgage from savings.

  8. Does anybody know utilizing this adversely affects your credit?

  9. No–it will not adversely affect your credit. Only by going late will. Your deed of trust will tell you if your mortgage is with Fannie and Freddie. It’s says it at the bottom of the page.

  10. If I have savings, will I still qualify for the stability and affordability plan?

  11. There is nothing that stipulates that having assets would be an issue under The Obama “Making Home Affordable (MHA)” plan. With that said, the lender/bank/investor could deny the modification if they feel you have the ability to make the payment and are not in a hardship.

  12. I put down payment of 50K, my house is 250K, I got a loan for 220K. My house not worth 180k. My question is
    a) would bank only consider 206K owed version house value of 180k and make refinance adjustment?
    b) I had a nose dive from 273k purchased price to 180k value now to make refinance adjustment even though I paid cash of 50k.

    Which of the above be evaluated?

  13. typo on the above on b) it is 250k not 273k (purchased price). sorry…

  14. do you have to run a credit check on loan modifications?

  15. Mark Bustamonte says

    Credit checks are not required nor having any bearing on a loan modification.

  16. mountaingoat says

    I am the only borrower on my house note and recently lost my job. My husband will be laid off in less than two weeks.
    We are not upside-down (but only have about 10% equity) and have never missed a payment or even been a day late since the inception of the mortgage.
    I called my lender to see if I qualify for this program since my unemployment benefits are about 1/5 of my previous income.
    They led me to believe that I need to be in foreclosure or at least delinquent in payments.
    They also scared me by making it sound as if my credit will be damaged.
    We could pay off this house if we took money from our 401k but that would drain our retirement and also we would have the penalties and interest.
    A friend of mine tried to get a loan mod (she is in the same boat, except her husband is self employed, he is not on their loan note) and was turned down.
    Does anyone know whether this program is working or not?

  17. Laura Cruz says

    Starting last year my incom lower down because I lost one of my jobs and this year in January my husband got cut in our too his salary was
    $865.00 per week and now is $430.00 I’m workin only 31/2 hours we are having a hard sheep to make the payments even do I am not behind I’m trying to be on time using my credit cards to make the payments, 2 months ago I tried to get the modification and yesterday May 13 they call me and told me that it was denied they sugest me to put the house on listin, they say that is was the only solution they find out on my situation. Also told me that even if they gave me the lowest mod I steel having negative balance even do I been cuting my spences as much as i can. I ask the person if I need more incom in order to ge the mod i will sacrifies my privacy renting a room and moving my daghter in to one room and she told me that if I do that they can consider that but if I do that I’m going to have enough maney to make the payment. She gave me alot of escuses and I realy don’t know what to do. Do I have to be on the situation of stop making the payments? what you sugest me to do

  18. Lost my job in January. I am making my payments from my savings. My bank just told my I do not qualify for a loan mod. Is it because I am still making payments? Do I need to stop?

  19. jede ferrani says

    I found your blog on google and read this great post on loan modification. I just added this site to my Google News Reader. I Look forward to reading more here in the future.

  20. I do not have a Fannie Mae and Freddie Mac loan can i still qualify for a loan mod?

  21. I also do not have a Fannie Mae or Freddie Mac loan. I owe $450,000 and my house just appraised for $375,000. I am on an adjustable rate that will start changing in December. Can I get a loan modification even if my loan is not Fannie or Freddie??

  22. I bought my house for 240K in 2006. My house is now worth 153K. between my wife and I, we make descent money. my wife makes descent money at her job, so do I? we always pay on time but it is very tough since we work so hard and building our credits. I have to go on deployment with the military in order to leave comfortable. I havent been home in 2 years. I am trying so hard, but am tired of being away from friends and family. DO you think we will qualify for a loan modification since house in my neighborhood are selling for 130-150K. Also, since I am making more money now so that I try to pay off my debts and people who I owe money to. what do I do? Can you give me an answer.

  23. I have been in a loan modification process with Wells Fargo for about 7 months, with reduced monthly payments while they consider my application. I have been denied twice, once due to not having enough income and the second is still a mystery. The process has definitely affected my credit with BOA and AMEX reducing my available credit from $ 12,000.00 to $ 1,000.00. It also shows up negatively on my credit report. I have never missed a payment however lost my job and then got re-employed. I have no idea what they base the criteria on, and have heard of only one person being approved for the loan modification. His lawyer told him to go 4 months delinquent on his payments and then apply, he was approved. I don’t have the stomach for that however, good luck out there.

  24. Don Burg says

    I have Freddie Mac backed loan at GMAC. I have been unemployed since November 2009. With no income other than unemployment, I was hopeful that the HARP program, that was rolled out under the pretense of helping the unemployed, would lower my payments while I collect unemployment and look for a new job. However, I learned today from my lender that I do not qualify for the modification because I have no income. Apparently, Freddie Mac does not allow their lenders to consider unemployment income as income! Therefore, I have no income and the lender has to deny my application for modification.

    This is puzzling to me as I thought the program was designed because of the high unemployment rate?!? How does this help if they don’t count unemployment income as income?

  25. JHarris says

    Do I qualify for loan modification if I closed on my house January 2, 2009. My husband is the bread winner of the family and lost his job. I meet all the criteria except the date. We were supposed to close in December but the bank kept pushing it out.
    I cant get anyone to give me a straigjt answer about the qualifing date.

  26. My sister file a bankcruptcy and she’s my co-owner soon i will having a problem to pay now my mortgages since she moved out already do you think ill be qualitfy for loan modification?

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