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1) About Housing Counselors

The Role of the Housing Counselor

Housing counselors give homeowners who are at risk of foreclosure personalized service and advice when discussing foreclosure alternatives. They are on your side. By using a counselor, you have someone who can discuss your housing situation and help decide what mortgage options are best for you. Counselors can provide the information, knowledge and education to understand what documents you’ll needed to give to the mortgage company. They may even be able to contact the mortgage company for you. Often, they can start the foreclosure alternative application in an online platform ( like Hope LoanPort® ).

According to the Treasury Department's website for mortgage assistance, http://www.makinghomeaffordable.gov, the following benefits come from working with a Housing Counselor:

The odds are 1.7 times greater that you will avoid foreclosure.

A housing counselor can also help you make a budget so that you can meet your monthly mortgage payment and other expenses.

The counselor will have information about local resources that may be helpful to you.

There is no fee to work with a HUD-approved counseling agency.

2) About Mortgage Servicers

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

Your mortgage servicer is the financial institution where you make your monthly payments. It’s very important to know who this is, so we can direct you to the people who really can make a decision on your foreclosure alternative application. Additionally, some mortgage servicers allow you to “Self Service” within Homeowner ConnectTM, and we need this information to make sure you’re connected to the right servicer.

Your loan servicer is responsible for the management and accounting of your loan. It’s possible that the owner of your mortgage also services it. However, many loans are owned by groups of investors. These investors usually hire loan servicers to deal with homeowners for them. Many lenders also have the loan servicers handle all contact with homeowners.

For example, your servicer could be Bank A but the investor in your loan could be Fannie Mae, Freddie Mac or a group of investors.

Is my servicer participating in Federal workout programs such as HAMP?

All servicers for loans owned or guaranteed by Fannie Mae and Freddie Mac are required to participate in HAMP (Home Affordable Modification Program). Additional servicers are strongly encouraged to participate. You can get a list of participating servicers at http://www.makinghomeaffordable.gov/get-assistance/contact-mortgage/Pages/default.aspx.Through Homeowner ConnectTM,whether you choose “Self Service” or you work with a housing counselor, your foreclosure alternative application will be reviewed against guidelines for all of the Federal programs (such as HAMP, HARP, and HAFA).

Where Do These Federal Programs Such as HAMP, HARP, and HAFA Come From?

The Federal programs that try to help homeowners avoid foreclosure are a part of the Making Home Affordable program, and can be reviewed at www.makinghomeaffordable.gov. Making Home Affordable Program is an important part of the President’s solution to help homeowners avoid foreclosure, stabilize the country's housing market, and improve the nation's economy. Programs look to lower payments and interest rates, to make mortgages more affordable. For homeowners who can no longer afford to pay their mortgage, or who don’t want to their home anymore, the program can give them a way out, other than foreclosure.

What is the Difference Between a Refinance and a Modification?

A “Refinance” is a new loan (with new terms, origination date, etc.). A Modification is a change to an existing loan. Usually, refinances are done through HARP, and are helpful to borrowers who are current on their mortgage and looking to lower their interest rate, but who haven’t been able to get approved for a refinance. This could be due to a lack of equity (usually because of a drop in their home’s value). Modifications are done through HAMP, and generally are aimed at borrowers who are at-risk of foreclosure and are looking for an option to fix their delinquency (late payments) and also help them with an affordable payment. Modifications can be handled several different ways, including a lower interest rate, principal forgiveness, or forbearance (temporary lowering of payment).

I'm current on my mortgage. Will a refinance under the Homeowner Connect TM Refinance Program (HARP) help me?

Yes, HARP is targeted to homeowners who are current on their mortgages, but who’ve been unable to take advantage of lower interest rates (usually because their homes have decreased in value). With a refinance under HARP, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they own or that they guaranteed in mortgage backed securities.

Does a refinance (such as HARP) reduce the amount that I owe on my loan?

No. The goal of a refinance under HARP is to help homeowners get into more stable or more affordable loans, by taking advantage of lower interest rates that might not otherwise be available to them because of their equity situation.

I have both a first lien and a second lien mortgage. Do I still qualify for a refinance under HARP?

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. And you must be able to show your ability to meet the new payment terms on the first lien mortgage.

I am delinquent on my mortgage. Will I qualify for a refinance under HARP or a Modification under HAMP?

Homeowners who are delinquent (late) on their mortgage, or have been more than 30 days overdue during the past 12 months, generally won’t qualify for a refinance. If you’ve been delinquent, the Modification programs (HAMP) have been set up to help, and you’ll be reviewed to see if this is an option for you.

Can I get a mortgage modification through the Home Affordable Modification Program (HAMP) if my loan is not owned or guaranteed by Fannie Mae or Freddie Mac?

Yes. HAMP helps homeowners who are struggling to keep their loans current or who are already behind on their mortgage payments. By giving participating mortgage loan servicers financial reasons to modify existing first lien mortgages, the U.S. Treasury hopes to help homeowners avoid foreclosure - regardless of who owns or guarantees the mortgage.

Can I Still Get A Modification if I am facing foreclosure?

Under the rules of HAMP, until you have been considered for HAMP and a trial modification offer has been made (if you’re eligible), participating servicers are NOT allowed to refer a loan for foreclosure sale or to proceed with a foreclosure sale on an eligible loan. Foreclosure sales may NOT be conducted while the loan is being considered for a modification or during the trial period. Also, 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 start a new foreclosure.

Do I need to be behind on my mortgage payments to be eligible for a modification (such as HAMP)?

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.

How do I know if my servicer is participating in HAMP? Are all servicers required to participate?

Participation in HAMP is mandatory for servicers of loans owned or guaranteed by Fannie Mae or Freddie Mac (Government Sponsored Enterprises or GSEs). Participation in HAMP is voluntary for servicers of non-GSE loans. However, incentives are available to servicers and investors who complete modifications under HAMP, and most major servicers already have committed to the Program.

What will my servicer do to determine if I qualify for for a modification?

Your mortgage servicer will decide whether you loan meets the eligibility rules for the program. For HAMP, your application will be reviewed for specific program rules, such as:

The property is either owner occupied or a rental home that is not a vacation or second home; the unpaid principal balance is not more than the loan limits for the number of units involved (see below); and you have a financial hardship.

Unpaid principal balance by number of units:
1) Unit $729,750
2) Units $934,200
3) Units $1,129,250
4)Units $1,403,400

If your loan meets the minimum eligibility criteria, the servicer will ask you to provide documentation proving your current income, assets and expenses, as well as any specific hardship circumstances, to determine if you are unable to make your mortgage payment. You will need to provide all verifying documentation before you can be approved for a loan modification trial period plan. For homeowners who choose Self Service through Homeowner ConnectTM, you’ll be able to submit the application, upload documents, and check on status directly within the Homeowner ConnectTM

Remember, even if you don’t qualify for HAMP, your servicer may offer you another foreclosure alternative solution that fits your financial situation.

What Are Trial Payments?

Trial payments are required by a servicer from the borrower to demonstrate the borrower’s ability to make the new monthly mortgage payments that were established by the modification. This also provides the homeowner some immediate relief and prevention of a potential foreclosure.

Once a modification’s been approved, your servicer will put you in a trial period plan (which should be three months - but it may be longer, depending on your situation) at a new trial payment level.

If you successfully make all of the required trial payments during the trial period, your servicer will send you a modification agreement to execute.

During the trial period, the terms and conditions of your original loan remain unchanged. ONLY after you make ALL of your trial payments (on time) can the servicer offer you a permanent modification.

If you cannot make your trial payments, it will generally drop your eligibility for that modification, but other assistance options (such as HAFA) do remain available.

If my mortgage qualifies for a modification (such as HAMP), 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). As always, your modified mortgage payment can fluctuate based on any changes to your monthly escrow payment.

I owe more than my house is worth. Will a modification under HAMP reduce what I owe?

The main objective of HAMP is to help homeowners avoid foreclosure by modifying troubled loans to get a payment the homeowner can afford. Servicers may, (but don’t have to) offer principal reductions. It’s much more likely that your servicer will use interest rate reductions and term extensions to make your payment more affordable.

How will I know if my loan can be modified?

Your servicer will work with you to help decide if your loan can be modified, either through HAMP or any other modification programs available. If you qualify for a modification program, your servicer will place you in a trial period plan. Homeowner ConnectTM will provide borrowers with a transparent connection to their servicer, to monitor the status of their foreclosure alternative application.

How much will a HAMP modification cost me?

Homeowners who qualify for a modification under HAMP are NEVER 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.

If you are provided assistance from a HUD-approved housing counseling agency, you will NOT be charged a counseling fee. 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.

3) Second Lien Modification Program (2MP)

What do I need to do to be considered for 2MP?

Under 2MP, when a homeowner's first lien is modified under HAMP and the servicer of the second lien is a 2MP participant, that servicer must offer to modify or provide some level of help on the borrower's second lien. The 2MP offer will be made by relying on the financial information provided by the homeowner in conjunction with the HAMP modification and without additional evaluation by the second lien servicer.

4) Home Affordable Unemployment Program (UP)

How do I apply for UP?

If you become unemployed, you can phone, email, or write to your servicer to request an UP forbearance plan. Your servicer must be a participating HAMP servicer in order to offer the program.

How long is the UP forbearance period?

The UP forbearance period is the lesser of twelve months long or when you are re-employed, as permitted by investor and regulatory guidelines.

What happens during the UP forbearance period?

During the UP forbearance period, your monthly mortgage payment must be reduced to no more than 31 percent of your gross monthly household income (payment could also be suspended entirely). Be sure to make these payments on time, so you don’t jeopardize your eligibility.

What happens at the end of the UP forbearance period?

If you get a new job during the forbearance period, let your servicer know. Otherwise, 30 days before your forbearance period expires, your servicer will provide you with an Initial Package of documents so that you can request a modification through the Home Affordable Modification Program (HAMP). Return the Initial Package immediately so that the servicer can formally evaluate you for HAMP.

What if I'm not eligible for UP?

The servicer will determine your eligibility for HAMP without unemployment income. If you are determined to be ineligible for HAMP, the servicer will consider you for other home retention options. If homeownership is no longer an affordable or desirable option, the servicer will consider you for additional foreclosure avoidance programs, including Home Affordable Foreclosure Alternatives Program (HAFA).

5) Home Affordable Foreclosure Alternatives Program (HAFA)

What other alternatives to foreclosure exist if I do not wish to continue to own my home?

For homeowners who no longer wish to own their residence, but are looking for a graceful exit that avoids foreclosure, foreclosure alternative programs exist to facilitate a Short Sale, or Deed In Lieu of Foreclosure transaction. Additionally, borrowers are reviewed for eligibility with the Home Affordable Foreclosure Alternatives (HAFA) Program.

How does a 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 Short Sale (such as HAFA), the servicer approves the Short Sale terms before listing the home, and then accepts the payoff as full satisfaction of the mortgage.

How does a 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.

6) Beware of Foreclosure Rescue Scams - Help Is Free!

What are some of the warning signs of scams or fraud?

There should NEVER be a fee for help with or information about Federal programs such as the Making Home Affordable program. Beware of ANY person or organization who asks you to pay an upfront fee in exchange for a counseling service or modification of a delinquent loan.

Do not pay – walk away!

Beware of anyone who says they can save your home if you sign or transfer over the deed to your house. Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt. Never make your mortgage payments to anyone other than your mortgage company without their approval.

What should I do if I've been scammed?

First, get the help you need to avoid foreclosure. Contact your servicer immediately. Contact a HUD-approved housing counselor through the Homeowner's HOPETM Hotline at 888-995-4673. Report the scam at https://www.ftccomplaintassistant.gov/