Mortgage News: Loan Modification Rates Drop

by Lin from MP, Illinois

Ask Kate about mortgage news for loan modification: Lin believes the bank is manipulating the modification process to foreclose on their home. But before we hear from Lin, I'll discuss the recent modification news. Effective September 15, 2015, Fannie Mae dropped the interest rate from 4.25 to 4.0 percent on their Standard Loan Modification program, intended for borrowers who don't qualify for HAMP.

By Fannie Mae dropping its interest rate, many struggling homeowners will be able to secure more affordable house payments.

Freddie Mac, not to be overshadowed its counterpart, followed with its own news. Effective March 1, 2016, Freddie will begin calculating a complicated loan-to-value ratio (MTMLTV) differently to allow more borrowers to qualify. MTMLTV stands for mark-to-market-loan-to-value, apparently so complicated, it will take until next spring for the suits at Freddie Mac to wrap their heads around the ratio. (Yep, that was sarcasm.)

Now let's read Lin's question about getting a modification for a mortgage that is not backed by Fannie Mae or Freddie Mac.

Ask Kate: Loan Modification and Foreclosure

By Lin from MP, Illinois

Kate,

I have tried tirelessly to obtain a home loan modification from BOA.

I have come to the conclusion that the bank knows all of the tricks to avoid a modification for a homeowner. They have much more money, resources, connections, and attorneys than a homeowner could ever have totally unlevelling the playing field.

I am told the investor doesn't modify and have also concluded, BOA purposely sold the loan to this investor just prior to foreclosing, so it wouldn't have to modify the loan although owned the loan at the time of the HAMP agreements.

I am in the end stages of the process, as mistakes were made early due to our lack of knowledge and experience.

Since it was not a Fannie Mae or Freddie Mac mortgage, we were also declined.

Do we have any alternatives left? If so, please let us know. We have a daughter living in the home with a disability and need some expert advice. Thank you.
Kate's Answer: Loan Modification and Foreclosure

Hi Lin,

Just to clarify for everyone reading this, loan modifications have to be issued from the current loan servicer. There's no shopping among lenders for a better deal.

Loan Modification Programs

That being said, there are several different ways to modify a mortgage, the most common being Making Home Affordable's HAMP program. Depending on the current mortgage, some borrowers may also be eligible for Fannie Mae or Freddie Mac modifications. Lastly, there is the odd duck, the proprietary in-house modification.

When Mortgage Modification Fails: Struggling Borrower Options

Since you sound confident that you've exhausted negotiations with your lender for modifying your home loan, I'll move on.

Although the options are limited, perhaps one will be of help to you.

• Homeowners do not have to be part of the Making Home Affordable Program to be eligible for Hardest Hit Funds Program (HHF) which reduces principal balances of mortgages, eliminates 2nd liens, and provides relocation funds.


• If you're on the edge of losing your home, you'll learn how to protect your credit (somewhat) and potentially limit your liability at Negotiating Deed in Lieu of Foreclosure.


• Should you decide to sell your home, being underwater does not mean the option is not available to you. Learn more at Making Home Affordable Short Sale Help.

Don't Overlook Public Assistance

I also urge you to take your plight public. Research special foundations that are associated with your daughter's disability to see if they provide mortgage assistance to struggling caretakers.

Take advantage of free HUD counseling. Reach out to the government. I've done the legwork here: How to Contact Washington DC and Your State Government. Wishing you the very best,

Have You Seen These Ask Kate Answers

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• Is Refinancing My FHA Loan Necessary to Cancel Mortgage Insurance
• Mortgage News: New Foreclosure Time Frames in 33 States Offer Hope

Got questions? You are invited to ask Kate for answers. Or post a quick comment or related question by clicking the link near the bottom of this page.

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