Updates & Clarification on Implementation of Programs
For additional help or clarification, please fill in the form below.

For guidance on calculating your modified mortgage payment, go to Calculate Your Mortgage.

Unemployment benefits.  Are they now allowed?
 (as of 2/10/11)  Wells Fargo CEO area has reported that "for the most part" unemployment is not allowed.  "A very few investors" now allow unemployment. 
Recommendation: Before answering any income verification questions, try to find out first if unemployment is allowed.  Assume NO when preparing your numbers for modification. Note: In the 2 modification lessons (Making Home Affordable and Traditional), read "12 ways to show income" to learn ways to augment income for modification purposes.

NEW! Get new Dodd-Frank Certification here. Fill it in and include it with your other documents for modifications and short sales.
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Principal balance reductions
The Obama administration and U.S. Treasury will give incentives to encourage principal balance reductions.  Caution: be aware that reductions are most like to occur on loans that are actually owned by the institution, i.e. applicable for Bank of America-owned loans (not Bank of America "serviced" loans).  A good example would be Wells Fargo Equity loans (they own these) and consequently they can make the decision on their own loans.
Especially if you have a 2nd mortgage (the "20" on the 80/20) or a HELOC (home equity line) ask UP FRONT if they will request a principal reduction on your behalf.  We are hearing more instances of reduction on the 2nds.
On HELOC's, another solution is to negotiate a settlement.  Prepare a letter to the CEO (Chief Executive Officer) of the Servicer offering 5% of the balance on the HELOC.   If they agree, then make sure you get them to agree to release of lien in writing.
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V A HAMP Servicers will first attempt to modify V.A. loans through the traditional method (see STEP 4 in Traditional lesson for formula). If the Borrower is not eligible for Traditional formulas, the Servicer will follow the guidelines of the Treasury HAMP. (See Calculation for Treasury HAMP Step 4).

•  97% of VA loans are in GNMA securities. GNMA guarantees investors the timely payment of principal and interest on loans insured by the Federal Housing Administration (FHA) and the Department of Veteran Affairs (VA).
•  The pools have guaranteed interest rates. That makes it difficult for Servicers to implement according to Treasury guidelines. For a Servicer to modify a loan in a pool, they have to “buy it”, “modify it” and put it back in the pool. This means that the loan has to have the same basic characteristics of the former loan (interest rate, loan period) in order for it to be returned to the pool. Expect the result to be a fixed rate for period of 30 years.

One more note: Remember, VA guarantees to the Servicer a maximum liability of 25% of the original loan amount. Let’s say the original loan amount was $200,000. VA guarantees 200,000 x .25 (25%) = $50,000.
Borrower has current principal balance + accrued interest + delinquency of $210,000. $210,000 x .25 = $52,500 which is over the guarantee of $50,000. This would indicate that the Servicer may not modify as it is too expensive for them.

If the Servicer will not modify:
1) Ask why and know the reason.
2) Ask the Servicer to refer to the V.A. to be reviewed for V.A. Refund. This means that V.A. will consider “buying” it from the Servicer. -- or --
3) Call V.A. 877-827-3702 to request that the V.A. Refund the Loan.
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CLARIFICATION:
Making Home Affordable “Set Asides” (principal balance deferment)
If a loan is still not affordable after following the required steps to reduce the mortgage PITI (principal, interest, taxes, and insurance) to 31%, the Servicer can defer part of the principal balance - a Set-Aside - and place it at the back end of the loan as a balloon payment.  Important!: The maximum principal balance deferment is restricted to the DIFFERENCE between mortgage balance versus fair market value of the property. Example: If a Borrower owes $200,000 and the value of the property is $175,000, the maximum deferment would be $25,000.

Making Home Affordable “Set Asides” and Eligibility
The Making Home Affordable program requires the Servicer to follow guidelines to attempt to reduce the mortgage payment to 31% of Gross Income. If, however, the maximum allowable “Set Aside” (see above) does not bring the payment to 31% of Gross Income, the Servicer cannot offer Making Home Affordable. (*Does not apply to FHA).
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Credit counseling prior to permanent modifications evaluated under HAMP.
Borrowers may receive a letter
(see sample letter) from the Servicer stating:

As a part of the Home Affordable Modification Program, if your debt-to-income ratio is 55% or greater you must get debt counseling.... As a part of the program you will need to work with a HUD-approved housing counseling agency.  Counselors will work with you to create a household budget and develop an action plan to reduce your household debts.
To fulfill this requirement, call Credit Counseling Services (CCCS) or a HUD counseling agency.  Tell them you have to receive credit counseling in order to receive the permanent modification.  Give them the same numbers that your Servicer currently has in their system.  They should tell you, after the phone session, that they will send a letter to the Servicer stating that the counseling requirement has been completed.  If you have any questions, please call Operation Restoration.
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The VA Streamline program ( Interest Rate Reduction Refinancing Loan, IRRRL) does not require an appraisal.  What is required is that the interest rate on the IRRRL is lower, and the payment on the IRRRL is lower than on the existing loan.  The lower rate and payment on the IRRRL should make it easier to afford.  VA doesn't require underwriting of credit, income, or LTV ratio on an IRRRL; the existing loan, however, cannot be delinquent.  A lender may decide to add on additional requirements, such a underwriting or LTV consideration, but it is not a VA requirement. Note: Operation Restoration is asking Servicers is they will require an appraisal for this program.  (will be updated).

Request for additional help

Thank you for contacting Operation Restoration. Please fill in the information below if you need clarification on material or guidance on strategy. We will contact you shortly. Notes: (1) While the information provided on the website is free to use (if it helps you in any way, please remember to donate), we are transitioning into a donation-based personalized assistance operation. As you know this arena is very specialized. This mission has spent extensive hours over the past 6 years to remain ahead of the curve. (2) Remember, your participation and team work are necessary as ongoing in-depth research is necessary to achieve leverage. Education empowers people to survive and succeed. We look forward to speaking with you. Sincerely, Anne Batte Executive Director