May 19, 2024


Mad about real estate

How To Calculate Your HAMP Home Affordable Modification Program Like Your Lender Does

How To Calculate Your HAMP Home Affordable Modification Program Like Your Lender Does.

BY Anna Cuevas; A Loan Mod Guru

Trying to navigate the tedious job of trying to modify your own loan is frustrating enough find some time to sit in silence and regroup your inner peace this way you can find the strength within you to carry on and be successful with your goals while maintaining a positive outlook and attitude.

Patience is important and I want to prepare you that even if for some reason you are denied you can find out why with the recent changes to the programs guidelines  as of 01/01/10 the servicer must tell you why you were denied, then you can work on making the necessary changes and then reapply.

This is what the lenders do to calculate:

You need to know exactly how much your total PreTax (gross) income is as they will use a percentage of 31{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} that will be the basis of you NEW MODIFIED PAYMENT this payment will include your first loan, property taxes, homeowners insurance, and homeowners association dues.  For the purposes of doing your calculations you must gather all of this information.  The TOTAL MODIFIED mortgage payment cannot exceed 31 {ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} of your gross income.

You need to answer these questions:

What is your gross income (before taxes)? Multiply the Gross not the Net by 31{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} )this is what they call DTI (Debt to Income Ratio).  Take the 31{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} amount and if your current payment is already under this amount you will be not be approved under the HAMP program.

What are the monthly Homeowners insurance, Property Taxes, HOA fees?  Take these numbers then, deduct this from the 31{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} income figure.  The balance is the maximum your total payment can be NOT including any 2nd mortgage.

How does the lender get you to that Maximum 1st Mortgage Payment? What they do to arrive at that payment is called the Waterfall. For the lender to arrive at the modified payment the first step will be for your lender to extend the term of your mortgage to a maximum of 40 years in order to lower the payment.

If this is not enough to get your payment to 31{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} then: they may lower your rate down to as low as 2{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} rate (usually for 5years then you will get it fixed for 30 years at the date of approvals going market rate but the change from the start rate to your fixed rate is gradual).

If this step is not enough to get your payment to 31{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} of your gross income then at the lenders discretion they may but not obligated to, the lender may defer some of the principal balance (*please note only a low percentages of all mortgages nationwide receive this, so it is best to not go into this with such a high unrealistic expectation), this consists of deferring a portion of the balance, usually interest free for the remainder of the loan but it will be due either upon sale, refinance or at the end of the specified term.

Principal forgiveness would be up to the investor and is highly unlikely.

If your maximum payment did not get to 31{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} of your gross income using step 1 and 2 and your lender does not subscribe to deferring principle then your HAMP loan modification request can possibly qualify for another internal program, or denied, if denied then you need to increase your income, try to lower your insurance and property taxes, if possible and then reapply and let your lender know you have new information to submit.  Keep your timeline in mind at all times and don’t forget to write down names, departments, and dates. This is YOUR home so it is imperative that you keep a close eye on this.  I have seen mistakes where people did not pay attention to this.

Keep this example in mind:(the original payment was $1500 per month, for example)

Let’s say your gross income is $2000 per month x 31{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} = $660 and the homeowners insurance, taxes, and Homeowners Association dues = 500, it is extremely unlikely that the lender would lower the actual mortgage principal and interest to $160 to arrive at the maximum total allowable  MODIFIED payment of $660 Remember the total modified payment includes the insurance, property taxes and HOA, and not any 2nd mortgages are included into the calculation. it is important to be realistic and work out your numbers.  This is key.

As an example scenario if they were to say the loan failed NPV Net Present Value test what that is in a nut shell is that according to a specific formula (NPV) it is more profitable to foreclose then to modify the loan.  In the example I listed here if they were to let someone go down to a $160 per month payment then obviously foreclosing would be more profitable if lets say the home was worth 200,000 they would gain more profit selling the home after foreclosure then agreeing to take such a drastic payment reduction.

Work on finding opportunities to increase your income if it is too low to qualify or you if you have been denied – Ask questions and get the exact detailed numbers they used and the reason for your denial. This way you can reapply when you can increase your income or maybe lower your insurance or property tax amounts.

They do not use your expenses or credit card debt into these figures (called ratios) but if you carry a large credit debt load you will be referred to credit counseling- I would also suggest debt settlement if you are already late on your other bills as well.

My advice is to please be prepared to be patient, yet commit to a positive mindset and commit to not give up and make the calls, take the action, and do the work if you are going to do this yourself you need to be your own advocate and give it your excellence.

This means get yourself organized and go above and beyond even if it take s a few no’s to get to the yes. This means not getting discouraged and working with determination.

Analyze your financial situation, make the necessary cutbacks, make a commitment to give this your all and that means to work on your mindset and remain as calm as possible so you can be successful at modifying your own mortgage loan.

Let me know how I can be of service to you!  Please pass this information on to others who need free help!