My Servicer Says They’re Not Participating

Since the announcement of President Obama’s Home Affordable Loan Modification and Home Affordable Refinancing programs, we’ve been getting a lot of questions about particular servicers and whether or not they’re going to participate in the program.

And so far, my predictions have been proven correct.  Most lenders are (or say they are) planning to participate.  As I talked about in my Home Affordable Refinance and Modification Update post a couple days ago, though, most (if not all) lenders have not completed their implementation of the plan yet.

Many of you have been asking what you can do if your servicers says they aren’t participating.  So many people have asked, I dug through the Borrower’s Q&A from the Treasury Department’s FinancialStability.gov web site again and found good news for some of you.

Good News for Some Home Affordable Refinances

If you’re trying to refinance a loan that’s securitized or owned by Fannie Mae, you will be able to approach other lenders to refinance your loan if your current one isn’t responsive or says they’re not participating.  The new lender must also be approved be approved by Fannie Mae.  Your current lender does not have to approve this.

Freddie Mac loans, however, must be refinanced with the same servicer unfortunately.

What About Home Affordable Modifications?

When you consider the actual mechanics of what’s happening with a refinance vs a modification, it becomes obvious why – even under the Treasury Department’s new program – you can’t switch to another lender to get your loan modified.

When you refinance, you’re ending one mortgage and beginning another one.  The new one replaces the old one…it doesn’t matter which lender it actually comes from.

Modifications on the other hand, only involve one servicer or lender.  They are modifying a previous agreement they made with you.  It makes sense that they aren’t able to modify an agreement they aren’t a part of.

For example…

Say you let your friend Larry borrow $100 and he agrees to repay you in 4 monthly installments of $25.

After 3 months go by, Larry still hasn’t paid you anything.  He comes to you and offers to pay you $75 now if you’ll forgive the other $25.  You say no way…you want all of your money.

Imagine that Larry goes to a mutual friend of yours named Sarah.  He tries to get Sarah to agree to take the  $75 he owes you rather than the $100.

If Sarah takes that money, it doesn’t cancel Larry’s debt to you because you never agreed to the deal and Sarah has no right to agree to it on your behalf.

In the same way, if your mortgage is with Countrywide, only Countrywide has the authority to modify the agreement because it’s between them and you.

How To Find Out If Your Servicer Is Participating

The first step you need to take whether you want to refinance or modify your mortgage is to find out if your servicer is participating or not.  Right now, there are 3 ways you can find this out.

1. Call your servicer and ask.  Some lenders may also post the information to their web site…but calling is the best way to get the most up-to-date information.

2. Go to the Contact Your Mortgage Servicer page on the Treasury Department’s  Making Home Affordable web site. Right now, there are no lenders listed on this page.  As lenders implement their programs, they will be listed, however.

3. Call the Homeowner’s HOPE Hotline at 888-995-HOPE.  You will speak to a HUD-approved counselor that will be able to guide you and give you more information.

What To Do If They Don’t Participate

If you’ve visited the Making Home Affordable site and called your lender and they aren’t participating in the President’s program, all you can do is request to work with the lender through their normal hardship process.  If you’re trying to refinance, you may be able to go to another lender, but right now, you’re out of luck if they don’t participate and you don’t qualify for a normal repayment plan, forbearance agreement, or modification.

So what’s your next step?

Don’t put all your eggs in one basket.  Just because you want to refinance or modify, don’t get so focused on that one potential solution that you lose sight of other options.  Maybe you can get money from a family member, cut expenses, get another job, or use a legal tactic to force your lender to negotiate. Don’t stop with just one option…be proactive and plan what you’re going to do…even if that means planning how you’re going to save enough money to rent a place.

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