| The Challenges You Face on Your Request for a | | | | Freddie Mac and FHA limits. |
| Loan Modification If Your Mortgage Is Not Owned by | | | | Mortgage companies took the subprime mortgages, |
| Fannie Mae, Freddie Mac or FHA | | | | the special mortgages for self employed people and |
| People facing foreclosure are being told that the best | | | | the jumbo mortgages, packaged them into increments |
| way for them to save their home is to request a loan | | | | of $100 million and sold these to investment firms on |
| modification. With a loan modification their monthly | | | | Wall Street. The investment firms typically sold portions |
| mortgage payment is reduced to a level they can | | | | of these to investors. |
| afford to make every month. As long as they make | | | | A challenge comes up when the person who has one |
| the new lower payment every month the foreclosure | | | | of these mortgages can no longer make the payment |
| process is stopped. | | | | and is facing foreclosure. If they request a loan |
| Loan Modifications are the main focus of the Making | | | | modification the mortgage company does not have to |
| Home Affordable Modification Program which was | | | | reduce their monthly mortgage payment to 31% of |
| announced in March of 2009. Under this program | | | | their income. They can reduce it to any amount they |
| mortgage payments are reduced to 31% of a person's | | | | want. There have been instances where a mortgage |
| income. This program is for all mortgages sold to | | | | company has actually increased the monthly payment |
| Fannie Mae and Freddie Mac. It also covers | | | | over what it had been prior to when the person |
| mortgages insured by the Federal Housing | | | | requested it be modified. |
| Administration (FHA). | | | | Since the Making Home Affordable Modification |
| The main reason mortgage payments can be reduced | | | | Program has standardized guidelines for loan |
| to 31% of a person's income is that Fannie Mae and | | | | modifications, more mortgage companies probably will |
| Freddie Mac are government sponsored companies. | | | | be following these. It should be easier for people facing |
| FHA is part of the Department of Housing and Urban | | | | foreclosure to have their mortgage payments reduced |
| Development. The government has more control over | | | | in line with the guidelines in the program. |
| the mortgages purchased by Fannie Mae and Freddie | | | | A second challenge is that the mortgage company |
| Mac or insured by FHA. | | | | technically has to get the investors who purchased |
| Fannie Mae and Freddie Mac sell bonds to investors. | | | | investments in the mortgage to agree to the |
| The money from the sale of these bonds is used to | | | | modification. They can have a major problem finding |
| cover the mortgages Fannie Mae and Freddie Mac | | | | these investors. A problem also arises if all the |
| buy. | | | | investors don't agree to the modification. |
| The Making Home Affordable Modification Program | | | | If the mortgage company goes ahead with a |
| standardized the guidelines for modifications. It is | | | | modification that an investor does not agree with, the |
| relatively easy for a person with a Fannie Mae, | | | | investor can sue the mortgage company. In May of |
| Freddie Mac or FHA mortgage to get a loan | | | | 2009 a foreclosure relief bill was signed into law. This |
| modification. | | | | bill contained a "safe harbor" provision. This provision |
| People with poorer credit who could not qualify for | | | | protects a mortgage company from a law suit filed by |
| Fannie Mae, Freddie Mac or FHA mortgages got | | | | an investor as long as the mortgage company |
| subprime mortgages. | | | | followed the guidelines established by the government |
| Many self employed people found that they could not | | | | when they modify loans. |
| qualify for mortgages through Fannie Mae, Freddie | | | | This should enable mortgage companies to modify |
| Mac or FHA either. So mortgage companies had | | | | more subprime mortgages, special mortgages for self |
| special mortgages for them. | | | | employed people and jumbo mortgages. People with |
| There are limits on the maximum amount of a Fannie | | | | one of these mortgages who are facing foreclosure |
| Mae, Freddie Mac or FHA mortgage. Mortgage | | | | should find it easier to get a lower monthly mortgage |
| companies made jumbo mortgages available for | | | | payment and to have their loan modified. This will help |
| people who needed amounts over the Fannie Mae, | | | | them save their home. |