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Since the last great recession of 2008, there have been different variations of modifications for homeowners to take advantage of on their homes.
The HAMP (Home Affordable Modification Program) is no longer available.
In my upcoming book Big Banks Small Thinking, I go into detail on traditional modifications. Now my book is available here!
However, there is another program that Fannie Mae has rolled out called the Flex Modification.
How Does The Flex Work
The way the Flex Modification works is you will be on a trial payment making the new modified payment for either 3 or 4 months. After the trial payments are complete the modification will occur. When the modification is going to occur you will be put in a 40-year mortgage. Sometimes the interest rate will decrease and/or also a non-interest bearing principal forbearance due at the end of your mortgage or when you payoff the loan. You must make your trial payment by the last day of the month or you will have to start the process all over again.
The servicer will suspend all foreclosure proceedings while you are on the trial payment plan, as long as you are making your payments on time.
In order to qualify for a 💪flex modification💪 your loan needs to be the following:
- Conventional first lien loan (must hold first lien position on your home);
- Property can be vacant or condemned;
- Your loan must be 60 delinquent or you have to show imminent default (definition is below);
- You must have had your loan for 12 months;
- Not subject to a recourse or indemnification arrangement;
- Not on an active or performing forbearance plan or repayment plan;
- Does not have a current offer of another loan modification workout plan; or
- On an active or performing loan modification trial period plan.
- The mortgage loan must not have been modified three or more times.
- The borrower (homeowner) must not have failed a trial period plan with the flex modification within the last 12 months.
- The mortgage loan must not have had a Flex Modification done within the last 12 months and is now 60 days or more delinquent of the effective date of the mortgage loan modification without being reinstated.
* imminent default is when the servicer determines that you will default on your loan in the next 90 days, due to your current circumstances.
Contact your servicer and ask for a BRP ( borrower response package ). You don’t have to fill out a BRP if your loan is any of the following:
- 90 days or more delinquent or
- was previously modified with a step-rate feature (described below), interest rate adjustment occurred within the last 12 months and the mortgage loan became 60 days delinquent after the interest rate adjustment.
* Step-Rate is an interest rate that increases every year for a few years and then stays fixed for the rest of the life of the loan. Example: first year 3%, second year 4%, third year 5%. Now the loan will have a fixed rate of 5% for the rest of the loan period.
* Converting from a flex modification trial period plan to a forbearance plan is not considered a failed trial period plan.
When Modification Has Occurred
The Flex Modification is not enforced unless all of the following have occurred:
- The borrower has satisfied all the requirements of the trial period plan;
- The borrower has executed and returned a copy of the loan modification agreement back to the servicer; and
- The servicer or mortgagee of record executes and dates the agreement.
Food For Thought
If you have already claimed bankruptcy and you want to do a loan modification remember that you will be reaffirming the mortgage loan debt.
Currently Reading:
Right now I started reading Home A Memoir of My Early Years by Julie Andrews. You can follow me on GoodReads and have your own reading challenge!
Comments: If you need help, have questions, or have completed a Flex Modification I’d love to hear from you! Please comment below or contact me.
