If you’ve been turned down for a Home Affordable Modification for a Freddie Mac mortgage, you may be able to make them reconsider your eligibility!
Here’s the deal…
Once you turn in all of your financial information to your lender, they have to plug it into a “Borrower Qualification Worksheet” to see if you qualify. This worksheet is a tool they use to standardize the process. It allows them to quickly evaluate your situation to see if you meet the specific ratios and net present value calculations necessary to qualify.
It’s all great and is a wonderful time saver…when it works properly. The problem is…it hasn’t been!
You see, one of the formulas is messed up in the current version of the spreadsheet. It mistakenly increases your net income by a factor of 1.5625 rather than the required 1.25 to achieve an estimate of gross income. While this sounds good, it actually isn’t.
Freddie Mac released this guidance on May 8th…
You may continue to use the current version of the Worksheet if you already downloaded it onto your desktop, provided that only the gross income feature is used to qualify the borrower. However, if you relied solely on the use of net income in any of the previous versions of the Borrower Qualification Worksheet to determine the potential eligibility of a Freddie Mac borrower under the Home Affordable Modification program, and the borrower was denied a Home Affordable Modification program modification due to either
1. A failure of the debt coverage ratio test
2. A current monthly housing expense-to-income ratio that is less than 31 percent, then you must re-assess the borrower for eligibility under the program.
You may not disqualify such borrowers from Home Affordable Modification program without re-determining whether the borrower is eligible, whether your determination is conducted manually, based on your own system’s calculations, earlier versions of the Worksheet using gross income, or the upcoming revised Worksheet.
The upcoming worksheet was released to Freddie Mac lenders on May 11.
So if you’ve been turned down and your loan is owned or serviced by Freddie Mac, you should call them and demand that they figure your eligibility again based on the new worksheet!
For more information on the Freddie Mac programs and the industry bulletins they use to release information to their lenders, check out the Freddie mac site.
Tags: freddie mac, government regulation, Home Affordable Modification, loan modification
May 13th, 2009 at 6:55 am
My situation is a bit sticky. My house is up for foreclosure, going through a divorce and I have applied for a short sale but…. my future ex makes enough, at least on paper where he can afford the house. I have not heard from the lender in two weeks, is this normal? If I am turned down for the short sale, could I still apply for loan modification?
PS: Your letter of hardship really helped me out.
Thanks
mc
Todd Temaat Reply:
May 13th, 2009 at 8:55 pm
Thanks for asking. Yes, you can apply for a short sale and a loan mod. Matter of fact, I’d recommend doing both at the same time. Most lenders would prefer to modify rather than short sale because they don’t lose as much money.
Not hearing from the lender is normal…they rarely return calls in my experience. Call them instead…every day if you have to. If they say they will call you by a certain date and don’t, call them the next day. Unfortunately, this is very much a case of the squeaky wheel getting the grease.
Finally, I’m not sure how your soon to be ex-spouse’s income will count into your modification/short sale package. It depends on how reliable it is and if you can prove how much of it you will get every month. They’re concerned with household income, but since he’s no longer in the house (I assume), you’ll probably only be able to count any alimony and/or child support he may be court ordered to pay you.
Glad you found the sample hardship letter helpful.
May 21st, 2009 at 1:55 pm
Does anyone have a copy of the “Borrower Qualification Worksheet”???
I’ve developed my own version with the waterfall effect, but would like to see the real magilla.
Todd Temaat Reply:
May 21st, 2009 at 2:49 pm
No, I’m afraid it’s only available once you’ve logged into Freddie Mac’s backend portal. Which is only available to lenders/servicers and other industry professionals.
September 8th, 2009 at 9:00 am
Can your loan be modified if there is a lien on the home. My husband lost his job, therfore is behind on Child Support, so the DA has placed a lien on the past due payments on our home. Since we are not selling the home, does this stop the modification?
Todd Temaat Reply:
September 9th, 2009 at 8:35 pm
Thanks for your question. Unfortunately, I don’t have the legal expertise to say. I can refer you to the National Association of Consumer Advocates website, though, to find a local lawyer that could help you out.