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

No related posts.