• DYE CULIK PC | Consumer Protection Division

New Loan Modification Standards to Take Effect Later This Year

loan modification standards 2017

Under the program, homeowners’ monthly mortgage payments will be reduced by approximately 20%. The reduction will be accomplished by a combination of steps, including capitalizing arrearages, reducing interest rates, and extending a mortgage’s term. Principal reductions are rarely, if ever recommended, according to the proposal.

These steps are called the “One Mod” waterfall. The program will be put into place by mortgage giants Fannie Mae and Freddie Mac around October 2017. Most other mortgage companies are expected to follow suit by then, or sooner.

This program would replace the federal Home Affordable Modification Program (HAMP), which began in 2009, but which expired in December 2016. That program was forecast to provide up to 4 million loan modifications. Due to massive denials of homeowners’ applications, however — about 70% of applications were denied — only 1.6 million actually received loan modifications. Under HAMP, loan modifications were generally accomplished by reducing the monthly mortgage payment to 31% of a homeowner’s gross monthly income, and included minor principal reductions.

Unfortunately, the One Mod program fails to address one of the major problems causing defaults: the fact that many homeowners are still under water on their mortgages, owing more than the property value. Studies by consumer-advocacy groups have found that principal reductions are a vital part of loan modifications. Undoubtedly, many lawsuits will be filed related to mortgage companies’ compliance with One Mod requirements.

More information is available here:

Foreclosure Prevention Returns to the Unknown (NYTimes)

Life After HAMP – The Future of Loss Mitigation (Mortgage Bankers Association)

“One Mod:” Principles for Post-HAMP Loan Modifications

Culik Law has helps hundreds of Massachusetts homeowners stop foreclosure and obtain loan modifications from virtually every major bank and mortgage servicer, and has filed numerous lawsuits, as well. If you are having trouble with your mortgage, contact us to see if we can help.

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