Best Mortgage Modification Strategies

by Elaine in Florida, by Daisy in Arizona, by Lee in NC, by Karen in Florida

Ask Kate for mortgage modification strategies: Elaine is approved for HAMP but a free consultation with an attorney said to dump the house. Yet a banker recommends keeping it due to the awesome principle reduction offer. Daisy's request to modify her mortgage was turned down due to a family inheritance. Lee's servicer participates in HAMP but not for rental investment properties. Can they do this, Lee asks me. Karen's modification nightmare is almost over but she wonders if she'll be required to pay closing costs.


Approved for HAMP Modification But Will Still Be Way Under Water

By Elaine from Lehigh Acres, Fl
Best Mortgage Modification Strategies

My bank has approved me for HAMP modification, with a principle reduction of $45,000 over a 3 year period but no decrease in my interest rate (6.5%).

But after all that, my house is still valued at 62k by the county and loan will still be 128k after the 3rd year. Is it even worth keeping the house? I am struggling to make a decision, which I must do to accept the modification. Can't seem to find any help.

Free consultation with an attorney said to dump it. A banker said it's awesome to get some principle reduction and I should keep it. I need wisdom.

***zz-portrait-left.shtml*** Ask Kate answers: Approved for HAMP Modification But Will Still Be Way Under Water

Hi Elaine,

I'd consider this first and foremost. Is the modified payment after the principal reduction affordable?

If the monthly house payment is not much higher than paying rent to a landlord, why not keep the house but change your outlook on paying off the mortgage.

You need somewhere to live assuming you don't have alternative arrangements with relatives or friends. So if the mortgage is in the neighborhood of customary rents, it might make sense to go through with the modification process and keep the house.

But if you are stretching your budget to the extent that it makes the rest of your life unbearable, don't beat yourself up for not taking advantage of the principal reduction.

This may interest you also: Short Sale and other HAFA Foreclosure Alternatives.

Oh one more thing! An assessment is not a property appraisal. The county assesses your house and land to determine your annual property taxes. You want the lowest assessment possible.

Best wishes,


Denied a HAMP Modification for Inheritance

By Daisy from Arizona

Hi Kate: Great site and very informative.

My question is this. I was just denied a HAMP Modification by Ocwen loans because we have not missed a payment. My investor is Bank of America and I've been transferred from American Home, to Homeward Residential, and now to Ocwen.

We filled out all of their paperwork in a timely manner and showed our hardship. But they saw our bank statement, showing we had money in the bank, and said we are current on our loan and can pay for it, even though my salary declined for the last two year.

Kate, that is money my husband inherited from his father. I don't feel we should have to spend it all just to pay our mortgage. Do you have any ideas of a program that could help us or do you think the Harp 3 Refi may help? We are currently 125K underwater in our area.

Thank for your help.

***zz-portrait-left.shtml*** Ask Kate answers: Denied a HAMP Modification for Inheritance

Hi Daisy,

If your mortgage is currently backed by Freddie Mac or Fannie Mae, there is no longer a hardship requirement. But with a sizable balance in your savings account, I doubt the bank is going to feel the need to modify your mortgage, that is, unless the inheritance was officially intended for another purpose.

For example, if that money was earmarked by the grandfather for your children's college expense, you could show the intent of your father-in-law was to send his grandchildren to universities. Offer a copy of the will when you talk with the servicer.

You might also ask your loan servicer if your husband's inheritance was in a living trust, IRA, or certificate of deposit, for example, if they'd alter their decision.

It is anyone's guess as to the HARP 3 guidelines. I wouldn't hold my breath waiting for it. Apparently up until now, it has been a great PR tool for the politicians. As a side note, I'm disgusted with the politicians' (both parties) reckless disregard of underwater homeowners.

Go here to read the stories of other homeowners who are also feeling the squeeze while attempting to modify their mortgages: Repercussions in Hardship Loan Modification Process.

Best wishes,


HAMP Phase 2 Participation for Rental Properties

By Lee C. from Dunn, NC

Kate, My servicer, Ocwen, says they participate in HAMP but not HAMP Phase 2. I have a Freddie Mac loan rental investment property that meets all the guidelines you specified.

My question is whether the servicer gets to choose whether to participate in the new HAMP guidelines under Phase 2 or if it is mandatory if they participate in HAMP at all.

***zz-portrait-left.shtml*** Ask Kate answers: HAMP Phase 2 Participation

Hi Lee,

I'm not sure that loan servicers are allowed to pick and choose which HAMP guidelines they participate in. But they are tricky and know how to bend the rules.

On the other hand, I know they can choose not to participate in the 2MP program of HAMP, for modifying 2nd mortgages. For example, I do not think Ocwen participates in the 2MP.

Here's what I suggest. Call a Making Home Affordable Counselor at 888-995-4673 and ask them to look into this for you. The housing experts are available 24 hours a day, 7 days a week throughout the entire year, servicing more than 160 languages. Ask for 'MHA Help' to escalate your call.

Before you call, read HAMP Mortgage Modification Tier II for Rental Property.

I'd really appreciate if you'd come back to this page and add a comment after you find out.

Best wishes,


Am I Required to Pay Closing Costs in the HAMP Program

By Karen from Florida

Kate, I got my mortgage modification approval but it's been a nightmare. Now I need to know if there are any closing costs.

***zz-portrait-left.shtml*** Ask Kate answers: Am I Required to Pay Closing Costs in the HAMP Program

Hi Karen,

No, there are no closing costs associated with the HAMP program. That being said, a few homeowners have told me they were required to bring in an upfront payment in cash as a good faith gesture.

I am not sure who is asking you for money but you should be aware of this modification scam.

Best wishes,



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