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Who is my “servicer?”  Is my servicer the same as my lender or investor?

Your loan servicer is the financial institution that collects your monthly mortgage payments and has responsibility for the management and accounting of your loan. It is possible that the owner of your mortgage also services it, however many loans are owned by groups of investors and these investors hire loan servicers to interact with homeowners on their behalf. Many lenders also have the loan servicers handle all contact with homeowners.

Traditionally, banks used money deposited in customers’ savings accounts to make loans. They held the loans, earning the interest as homeowners repaid over time. Banks were thus limited in the number of loans they could make because they had to wait to make new ones until savings deposits grew or existing homeowners repaid their loans. Many families who wanted to own a home were unable to do so because there was not a steady supply of money for banks to lend.

Over time, banks started to turn loans into cash by pooling large groups of loans together to create mortgage backed securities that could be sold to investors such as pension funds and hedge funds. The investors get the right to collect future payments and the bank gets cash that it can use to make more loans. Investors hire loan servicers to collect payments and interact with customers.

If you have questions about your loan, or you are behind on your payments, you should call your loan servicer at the number on your payment coupon or monthly mortgage statement.

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Will refinancing lower my payments? How might loan modification benefit me?
The objective of a refinance is to provide creditworthy homeowners who have shown a commitment to paying their mortgage the opportunity to get into a new mortgage with better terms.

Homeowners whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments. Homeowners who are paying interest only, who have a low introductory rate that will increase in the future, or who face a balloon payment may not see their current payment go down if they refinance to a fixed rate and payment. These homeowners, however, could save a great deal of money by reducing the amount of interest you pay over the life of the loan.

Refinancing into a more stable fixed-rate loan product and avoiding future mortgage payment increases would likely improve your ability to sustain your mortgage payments over the long-term. When you submit a loan application, your lender will give you a “Good Faith Estimate” and a “Truth in Lending Statement” that includes your new interest rate, mortgage payment, and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.

Will a refinance reduce the amount that I owe on my loan? 
No. The objective of a refinance under is to help homeowners get into more stable or more affordable loans. Refinancing will not reduce the principal amount you owe to the first lien mortgage holder or any other debt you owe.

How will I know if a refinance will improve the long-term affordability or stability of my loan? 
When you submit a loan application, your lender will give you a “Good Faith Estimate” and a “Truth in Lending Statement” that includes your new interest rate, mortgage payment, and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.

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I owe more than my property is worth?

Short Sale solution.

I have both a first lien and a second lien mortgage. Do I still qualify for a refinance ? 
Your eligibility will depend, in part, on two additional requirements:

• The lender that has your junior lien mortgage must agree to remain in a junior lien position.

• You must be able to demonstrate your ability to meet the new payment terms on the first lien mortgage.

What are the interest rate and other terms of a refinance? 
The rate will be based on market rates in effect at the time of the refinance and the homeowner will be subject to any associated points and fees quoted by the lender. Interest rates may vary across lenders and over time as market rates adjust.

1. Are you having trouble paying your mortgage?For example, have you had a significant increase in your mortgage payment OR reduction in your income since you got your current loan OR have you suffered a hardship that has increased your expenses (like medical bills)?

2. Have a mortgage payment that is not affordable due to a financial hardship that can be documented.

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Can the Making Home Affordable Program help me? 
Yes. The Program helps homeowners who are struggling to keep their loans current or who are already behind on their mortgage payments. By providing mortgage loan servicers with financial incentives to modify existing first lien mortgages, the Treasury hopes to help homeowners avoid foreclosure regardless of who owns or guarantees the mortgage.

What if I am facing foreclosure?
Participating servicers may not proceed with a foreclosure sale on an eligible loan until the homeowner has been evaluated for loan modification and, if eligible, a trial modification offer has been made. Participating servicers must use reasonable efforts to contact homeowners facing foreclosure to determine their eligibility. Foreclosure sales may not be conducted while the loan is being considered for a modification or during the trial period.

Additionally, once a homeowner has entered into a trial period plan by submitting the first trial period payment, the servicer may not take the first legal action to initiate a new foreclosure.

Do I need to be behind on my mortgage payments to be eligible for a modification?
No. Responsible homeowners who are struggling to remain current on their mortgage payments are eligible if they reasonably believe they are very likely to default on their mortgage soon (often referred to by loan servicers as “imminent default”). This might be because a homeowner has had (or will have) a significant increase in the mortgage payment (due to a payment adjustment or rate adjustment upwards); unemployment or some other significant reduction in income; or some other financial hardship that will make the mortgage unaffordable. If you are facing a similar situation, contact your servicer. You will be required to document your income and expenses and provide evidence of the hardship or change in your circumstances

I have a junior lien mortgage. Am I still eligible? 
Yes, the first lien mortgage is eligible for a modification.

Why does my loan servicer have to ask the lender or investor if they can do a loan modification?
If the organization that services your loan does not own it, your servicer may need to get permission from the owner or investor before they can change any of the terms of your loan. Generally, there is a contract between the servicer and the investor that states what kind of actions the servicer is allowed to take. Most of these contracts, usually called servicing agreements or pooling and servicing agreements (PSAs), give the servicer flexibility to make modification decisions as long as the modification provides a better financial outcome for the lender or investor than not modifying the loan.

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If I don’t currently have an escrow account on my mortgage, am I still eligible for a modification under loan modification?
Yes, you are still eligible to apply for a modification. Should you qualify for a modification and make all trial payments on time, your modification agreement with your servicer will require the servicer to set aside a portion of your new monthly payment in an escrow account for payment of your property taxes and insurance premiums.

If my mortgage qualifies for a modification, will my escrow account payment change?
It might. Your escrow payment will adjust if your taxes and insurance premiums change, so the amount of your monthly payment that the servicer must place in escrow will also adjust as permitted by law.

What will the servicer do to get my new modified payment down to 31% of my gross income?

• Forbear (defer) principal. If your payment is still not low enough, your servicer may defer a portion of the principal amount you owe until the maturity of the loan. This is called a principal forbearance. With a forbearance, you will still owe the principal; but repayment is deferred until a later date.

A portion of the principal could be also be forgiven. This is optional on the part of the servicer. There is no requirement for principal reduction or forgiveness, and there is no guarantee that your servicer will offer principal reduction or forgiveness.

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What is a trial period?
The trial period is typically a three month period to see if the new payment plan will work for you, while providing you immediate relief and preventing any possible foreclosure sales from occurring. You should remember that during the trial, the terms and conditions of your original loan remain unchanged and only after you make all of your trial payments on time and send in all required documentation can your loan be officially modified.

Could my payment change in or after the trial period?
Your payment will be based on 31% of your verified income. If the trial period plan was based on stated income, and your verified income is different than what was previously stated, your payment will change to reflect 31% of your actual income. Your monthly payment could also increase if property taxes, homeowner’s insurance, or homeowner’s association fees increase after the trial period.

How will the modification affect my credit?
Accepting a loan modification can affect your credit score, but the actual effect will depend on a variety of factors.

Each month, servicers must describe to the credit reporting agencies the exact status of each mortgage. If you are current with your mortgage payments prior to the trial period and you make each trial period payment on time, your servicer must report you as current and also identify the loan as “modified under federal government plan.”

If you are delinquent (at least 30 days past the due date) prior to the trial period and the reduced payments do not bring the account current, your servicer must report the level of delinquency and also identify the loan as “modified under federal government plan.”

How will I know if my loan can be modified?
Once your servicer confirms that you are eligible and you make all of your trial period payments on time, you will receive a modification agreement detailing the terms of the modified loan. Any difference between the amount of the trial period payments and your regular mortgage payment will be added to the balance of your loan along with any other past due amounts as permitted by your loan documents. While this will increase the total amount that you owe, it should not significantly change the amount of your modified mortgage payment as that is determined based on your total monthly gross income, not your loan balance.

How might the terms and conditions of the trial period differ from the official modification?
Once your loan is modified, your interest rate and monthly principal and interest payment will be fixed for the life of your mortgage unless your initial modified interest rate is below current market interest rates.

If the servicer lowered your mortgage interest rate to make your payments more affordable, your initial modified interest rate could be below current market interest rates. In that case, the initial interest rate will be fixed for five years, and the amount you pay each month for principal and interest will not change for those five years or 60 months.

After five years, your interest rate will increase by 1% per year until it reaches the cap, which would equal the market interest rate being charged by mortgage lenders on the day your official modification agreement was prepared (the Freddie Mac Primary Mortgage Market Survey Rate for 30-year, fixed-rate conforming mortgages).

Once your interest rate reaches that cap, it will be fixed for the life of your loan. Like your trial period payment, your new monthly payment will also include an escrow for property taxes and hazard insurance.

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Could I end up with a balloon payment? 
Yes. If your servicer determines that a principal forbearance is required to get your monthly mortgage payment to an affordable level, the principal forbearance amount, say for example this was $20,000, would be subtracted from the amount used to calculate your monthly mortgage payment, but you would still owe the money. You would have a $20,000 balloon payment that accrues no interest and was not due until you pay off your loan, refinance or sell your house.

What happens if I am unable to make payments during the trial period? 
Homeowners who are unable to make the required payments by the end of the trial period are not eligible for a permanent modification. However, you may be eligible for other foreclosure prevention options offered by your servicer.

How much will a modification cost me? 
Homeowners who qualify for a modification will never be required to pay a modification fee or pay past-due late fees. If there are costs associated with the modification, such as payment of back taxes, your servicer will give you the option of adding them to the amount you owe on your mortgage or paying some or all of the expenses in advance. Paying these expenses in advance will reduce your new monthly payment and save interest costs over the life of your loan.

Homeowners should beware of any organization that attempts to charge an upfront fee for housing counseling or modification of a delinquent loan, or any organization that claims to guarantee success.

I do not live in the house that secures the mortgage I’d like to modify. Is this mortgage eligible for a modification? 
No. If you own a house that you use as a vacation home or that you rent out to tenants, the mortgage on that house is not eligible to be modified usually. If you used to live in the home but you moved out, the mortgage may not be eligible. Only the first lien mortgage on your primary residence is eligible. The servicer will check to see if the dwelling is your primary residence. Misrepresenting your occupancy in order to qualify for this program is a violation of Federal law and may have serious legal consequences.

I have a mortgage on a duplex. I live in one unit and rent the other unit. Will I still be eligible? 
Yes. Mortgages on two, three and four-unit properties are eligible as long as you live in one unit as your primary residence.

My loan is scheduled for foreclosure soon. What should I do?
Contact your servicer immediately and ask to be considered for a modification, and, if eligible, offer you a trial modification.

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How does the Short Sale work?
In a Short Sale, the homeowner sells the property for less than the full amount due on the mortgage. When a homeowner qualifies for the HAFA Short Sale, the servicer approves the Short Sale terms prior to listing the home and then accepts the payoff in full satisfaction of the mortgage.

How does the HAFA Deed-in-Lieu of Foreclosure work?
With the Deed-in-Lieu of Foreclosure, the homeowner voluntarily transfers ownership of the property to the servicer in full satisfaction of the total amount due. The servicer may require that the homeowner list and market the property before they agree to a deed-in-lieu arrangement. In order for the Deed-in-Lieu of Foreclosure to work, the homeowner must provide a marketable title, free and clear of other mortgages, liens, or other encumbrances.

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Mortgage Modifications – Programs may provide for mortgage modification of loans held by HFAs or other financial institutions or provide incentives for servicers / investors to modify loans.

Mortgage Modifications with Principal Forbearance – Programs may provide for paying down all or a portion of an overleveraged loan and taking back a note from the borrower for that amount in order to facilitate additional modifications.

Short Sales / Deeds-In-Lieu of Foreclosure – Programs may provide for assistance with short sales and deeds-in-lieu of foreclosure in order to prevent avoidable foreclosures.

Principal Reduction Programs for Borrowers with Severe Negative Equity – Programs may provide incentives for financial institutions to write-down a portion of unpaid principal balance for homeowners with severe negative equity.

Unemployment Programs – Programs may provide for assistance to unemployed borrowers to help them avoid preventable foreclosures.

Second Lien Reductions – Programs may provide incentives to reduce or modify second liens.

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