Before I address this topic, I want to make sure you are aware that this is NOT HARP 3.0! This is for servicers only, and is another available tool in the suite of tools that are available to borrowers who are in danger of losing their homes to foreclosure, and acts as another option for delinquent borrowers to save their home.
However, this information is important to your business. I will discuss in further detail below how to use this information to your benefit.
This program starts July 1, 2013 and expires August 1, 2015.
The program is available to those homeowners with loans owned or guaranteed by Fannie Mae or Freddie Mac.
Here is the information regarding this announcement.
The Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac will offer a new, simplified loan modification initiative to minimize losses and to help troubled borrowers avoid foreclosure and stay in their homes. Beginning July 1, 2013 servicers will be required to offer eligible borrowers who are at least 90 days delinquent on their mortgage an easy way to lower their monthly payments and modify their mortgage without requiring financial or hardship documentation.
The new Streamlined Modification Initiative eliminates the administrative barriers associated with document collection and evaluation. Eligible borrowers must demonstrate a willingness and ability to pay by making three on-time trial payments, after which the mortgage will be permanently modified. Homeowners are encouraged to continue working with their servicer to evaluate all of their foreclosure prevention options. Documenting income and financial hardship could result in a modification with additional savings for the borrower.
……” Under the Streamlined Modification Initiative, many borrowers who are at least 90 days delinquent will be sent a Streamlined Modification Solicitation Offer that includes a Trial Period Plan specifying the dollar amount of the new mortgage payment based upon a fixed interest rate, extending the payment terms to 40 years, and providing principal forbearance for certain underwater borrowers. Borrowers will not be required to document their hardship or financial situations to receive the Streamlined Modification”……
• The loan must be owned or guaranteed by Fannie Mae or Freddie Mac.
• Homeowners must be 90 days to 24 months delinquent, and
• Have a first-lien mortgage that is at least 12 months old with a loan-to-value ratio equal to or greater than 80 percent.
• Loans that have been modified two or more times previously are not eligible.
As of July 1, 2013, servicers must identify eligible borrowers who are 90 days to 24 months delinquent and send them an offer letter that states the terms of the modification, including the monthly payment required for a Streamlined Modification. These eligible borrowers can accept a Streamlined Modification Trial Period Plan by sending the specified payment to the loan servicer.
What is the primary change between a Standard Modification and a Streamlined Modification?
- With the Streamlined Modification you must be at least 90 days delinquent and no more than 24 months delinquent.
- With the Streamlined Modification you do not have to submit hardship information or financial information.
- With the Streamlined Modification you will be contacted by the servicer beginning after July 1, 2013 and this will be done automatically by the servicer contacting the borrower.
So how can this help you? Many borrowers are looking for alternatives when they are declined for a HARP Refinance through the DU or LP options like DU Refi Plus or LP Open Access, and this gives you the groundwork to provide them direction at a very stressful time for them.
We all know that future customers come from building lasting relationships. By being able to provide the borrower with viable options you can create a long-lasting relationship, and when certain time limits have elapsed for the borrower, you may be able to assist them with a standard refinance on their property or help them with new purchase money loan when the time comes.
There are many borrowers that are still afraid of telling you their real credit issues, and begin the process of a HARP refinance without telling you that they have been late in the past 12 months or that they are currently delinquent. This information will be an excellent transition to give them peace of mind that there are still viable options to retain their home. This new streamlined modification program is available for all occupancy types!
Unlike the Standard Modification program, where you did not have to be delinquent to pursue a modification to the existing loan, the Streamlined Modification program does require you to be delinquent a minimum of 90 days.
I strongly encourage you NOT to direct borrowers that may only be delinquent 30 to 60 days to continue to miss their payments to become eligible for this program; however, many borrowers may already be in a position where they are unable to make their mortgage payments as scheduled. You do not want to leave them with the impression that you directed them to stop making payments to become eligible. You do not need this blemish out there, especially with the new consumer complaint database for consumers to report this, if for some reason the streamlined modification does not work out for them.
Bottom Line: Share this information with clients that you were not able to help with a HARP refinance, and develop a long-lasting relationship. The borrower is more likely to remember you and your solutions if you can help them avoid losing their home, regardless of occupancy type, when the time comes to help them with a standard refinance or purchase as long as you stay in contact with them through your contact management tools.
By Lloyd Rutherford, Staff Writer, www.MortgageCurrentcy.com. Keep up to date with what's happening in with the mortgage rule updates www.MortgageCurrentcy.com