What is it?
This program provides the lender with incentives to reduce the current mortgage payment to 38% Front-End DTI (DTI is Debt-to-Income ratio). In plain English that means that the sum of all mortgage expenses, such as payment, property taxes, insurance and so forth, must be reduced to 38% of current pre-tax income. For example, pre-tax income is $3,000. Maximum DTI allowed to qualify is $1,140, which is 38% of income. The lender must reduce the mortgage portion of DTI to a number that when combined with the property insurance, property taxes and other related mortgage expenses, does not exceed $1,140.
If the lender is able to make those reductions, the Department of Treasury will provide a number of incentives as compensation.
First, Treasury will lower TDI even further, matching lenders concession on dollar-to-dollar basis. Treasury incentives, combined with lender reductions, will result in DTI of 31% or in above example – $930 per month.
Second, Department of Treasury will provide the lender with a $1,000 up-front compensation. Additionally, for every year that you stay in this program, and keep up with your payments, the servicer will receive up to a $1,000 per year, for three years.
Third, if you are current on your mortgage (meaning, less than 30-days late) or have agreed to participate in this program before you were 30-days late, the lender will receive an additional $1,500 as a bonus. Now, take a minute and add these bonuses. Your lender stands to get as much as $5,500 if you were to refinance!
Do I qualify?
The program requirements are relatively modest. Along with tax returns, pay stubs, form 4506-T (Request for Transcript of Tax Return) the requirements are:
- Lender must be able to reduce DTI to 38% as described above
- The home must be an owner occupied, single family 1-4 unit property
- The home must be your primary residence
- The home may not be investor-owned
- The home may not be vacant or condemned
- Borrowers in bankruptcy are not automatically eliminated from consideration for a modification
- If you are in foreclosure – you can qualify for a modification without waiving your legal rights
- Unpaid mortgage balance must be equal to or less than: $729,750
- There is no minimum or maximum LTV ratio for eligibility purposes
What will this cost me?
You know in life there are no “free” things. Well, in this case, as strange as it sounds everything is free. Moreover you actually get paid if you are lucky enough to have a lender that will consider this program.
- There are no modification fees or charges borne by the borrower.
- Modification fees and charges to the servicer will be reimbursable by the investor. These include notary fees, property valuation and other required fees. Servicer reimbursement by the investor will take place within the normal process between the servicer and the investor.
- Unpaid late fees will be waived for the borrower. These include late fees prior to the start of the Trial Period and accrued during the period.
- The servicer will cover the cost of the credit report.
Additionally, if you pay your new mortgage on time you will be eligible to accrue up to $1,000 each year in Pay-for-Performance Success Payments. And this works for up to five years – that means you can receive up to $5,000. The payment will be directed to the servicer, who will use these payments to reduce the principal balance of your mortgage.
How do I sign up?
The first step is to contact your lender. Regardless of your situation, this program is available, and lenders are considering it. You must prove to your lender, that this program is a better deal for them. How do you do that? Well, that’s for you to decide…
Official and somewhat confusing description of this program
Related posts:
- North Carolina Foreclosure Assistance
- New Jersey Foreclosure Assistance
- Pennsylvania Foreclosure Assistance
- Texas Foreclosure Assistance
- Arizona Foreclosure Assistance
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{ 1 comment… read it below or add one }
I have just been served my foreclosure notice, which is just killing me. I have been working with the lender/servicer and they just seem to be dragging their end of the process. I had submitted a letter back last April and never heard anything then once the Governments no-Foreclosure period was over I heardd from them and was asked to submit a package, consisting of a hardship letter, financials, paystubs, tax returns and supporting documents. I then received a letter from a lawyer stating that they have been retained by Lender/Servicer to begin the process of collecting the debt (this was last week). I contacted the leder/servicer who said that they needed some additional documents, IE updated paystubs letter from doctor stating I was in hospital for over 18 months and they (lender/servicer) were continuing with the foreclosure.
Now how is anyone suppose to feel comfortable with the pressure of foreclosure hanging over them while they are pushing to go forward with the foreclosure. All the while the lender/servicer is telling me that it looks good for the modification so I move forward and rent out a room, to help with income, sell some of my stuff to get money ready to go forward.
I think that if the state approves a moritorium on foreclosures it will put some leverage back into the peoples hands that are working with the banks/lender/servicers as right now they have us running around and have no intention of doing a modification.
I have been in my house for over 15 years, I am in a wheelchair and have worked hard all my life to lose everything because the lender/servicers is still being greedy and I was hospitalized for 18 months without insurance. My loan is not FNMA or FREDDY MAC so I do not fall in that circle of support, my loan is held by a service company for a hedge fund.
I am losing my home, my faith in the system, I have lost everything as my retirment was my house and the equity is gone, I owe 550k and the house is lucky if it worth 300k. Thanks the the present state of the economy and the people who took/take our money and never look back.