Mortgage Company Won’t Modify Loan Because it is an FHA. – Debora

Debora wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

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“Dear Steve,

In January I lost my job. My husbands hours were cut. We have fallen behind on all of our bills including our mortgage. I have tried to refinance so that we can save our house but our home value came back at less then what we owe so that was not an option. I am not looking for cash back. I just want a lower interest rate.

The gentleman that we were dealing with to refinance told me that our mortgage company would not modify our loan since it is FHA insured. Is this true?

Debora”

The Answer:

 

Dear Debora,

Because a home is FHA insured it would fall under the HOPE for Homeowners program from FHA. So FHA does offer a modification program. I don’t have a clue why the guy said an FHA mortgage was not eligible, unless your lender does not participate.

The criteria for the FHA mortgage modification program are that borrowers must meet the following criteria:

  • Their mortgage must have originated on or before January 1, 2008;
  • They cannot afford their current loan;
  • They must have made a minimum of six full payments on their existing first mortgage and did not intentionally miss mortgage payments;
  • They do not own a second home;
  • Their mortgage debt-to-income must be at least 31 percent;
  • They did not knowingly or willfully provide false information to obtain the existing mortgage, and they have not been convicted of fraud in the last 10 years;
  • They must follow FHA’s long-standing and strict policy of fully documented income and employment.
  • Homeowners must agree to share both the equity created at the beginning of their new HOPE for Homeowners mortgage and any future appreciation in the value of their home.
  • To participate, existing subordinate lenders must agree to release their outstanding mortgage liens.

To find out if your lender participates in the program, review the HOPE for Homeowners Participating Lenders List.

If your lender is listed in the listing of participating mortgage companies, contact your mortgage company and ask for specific details or contact a local housing counselor for help.

Big Hug!

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  • Maximumautoworks

    Unfortunatly as I found out the HOPE program will not modify your loan if you are currently on Unemployment benefits. What are options for people who are unemployed. I am working but my husband was laid off over a year ago. I have tried to modify my mortgage thru Citi Mortgage but they are just having me send in hardship packages. I have sent 6 so far and no one is ever assigned to my account the hardship “times out” for more information needed even thou no one has been assigned to account. Is there anyone who will refinance someone who in on unemployment with an FHA loan? obviously my credit is shot now since we are behind in payments.

  • Athena

    I know exactly what you mean my husband and I are severly underwater in our loan and our whole culdesac has foreclosed because of it. Our property is not worth what we payed and the whole community value has decreased signifigantly.We have not payed in a year because we were advised they would not help us if we were paying. We now have terrible credit,( before we had never been even late on anything)and the Bof A wont modify our loan according to its value. Oh they said there going to modify it but of course all there doing is lowering the payment and making the loan last for 40 years instead of 30. I have been working with NACA and have not had any luck with them either, I have almost lost all hope. The only thing that is keeping me is my faith in GOD. I live in AZ and I have heard that we are one of the five states to hit the hardest with the foreclosure crisis im hoping our government will do somthing about it soon, but not counting on it. Good luck and God Bless…

  • Pamela

    Jared I do feel for you. My husband and I are in the same situation, except we have a fixed loan. We refinanced last year with a FHA loan before every thing went crazy. I called my mortgage company and they said they would not help us because our loan is backed by FHA loan. My husband and I make only 20 an hour together and our mortgage is 908.00 monthly. Out mortgage company says we make too much money for any assistance. However , they could help us if we would get behind on our payments. Thats crazy, people who pay thier bill, but are struggling to put food on the table get no help at all.

  • Jared

    My wife and I bought our home during the peak and even with a large down payment are severely underwater after only being in the home less than two years. On the advice of our loan officer we took an ARM due to high interest rates for conforming 30 year loans. We were told we could refinance after one year to traditional 30 year loan. Then the market crashed and we could not refinance. Our loan is not due to reset for several years and we are current, however we fear the possibility of future hyperinflation and are desperately trying to conform to a 30 year fixed.

    I have contacted Freddie Mac, the securer of my loan for instruction. I was told that I would qualify for the president’s new hope for Making Home Affordability Plan. I also checked the making homes affordable website. Freddie Mac instructed me to contact my lender Country Wide now Bank of America. I was told they have tools such as loan modification as well as interest rate reduction that would allow me to fall within the 105% loan to value target. We have interest only conventional loans and both are from Freddie Mac. One of our loan is suppose to reset in 4 years and the other one resets in 7 years ballooning to a higher interest.

    Bank of America refused I was then told to call hope for home owners. After spending many agonizing hours, days, and weeks with Bank of America they informed me that we don’t qualify for their Making Home Affordability and there are no programs that qualifies us to modify our loan. Then they sent me to home retention. Home retention stated that they were not helping anyone who was “current” on their mortgage. If I wanted help I had to stop paying on my mortgage. This was suggested by at least 3 different people at Bank of America!!!

    I then turned to HOPE, I am currently enrolled in the services of MMI (money management international). They sent an outreach to Bank of America (Countrywide) on April 3rd. Bank of America has denied receiving as of April 23rd. I am now contacting both Freddie Mac and MMI again.

    My wife and I recently attended the Making Home Affordability HUD Counselor Workshop Seminar. The Hud counselor went through our finances and told us that we are qualified for the Making Home Affordable Plan and the Bank should offer us this plan. We then called Bank of America again asking for all the right words based on the HUD counselor had instructed us to do. Bank of America denied us to be qualified for the plan again! The Customer Service on the other end of the line was so rude and will not work with us; she said there are no plans that fit our situation.

    The counselor informed us that Bank of America are denying people and pretending that they don’t have such plan in their system to offer to the customer; because the bank are so backed up and they are forcing people to foreclose in their home. So then people would not have a choice but to take the banks offer which is not in the Obama’s Plan.

    My loan to value is about 118% due to all the foreclosures in my neighborhood. After checking around many of the homes that have foreclosed have been so called no doc loans by institutions similar to Bank of America (Countrywide).

    My own experience with this institution has been negative to say the least. I have been passed on, lied to, and have been given questionable advise by nearly every agent (not pay your mortgage to qualify?). Bank of America has taken several billion dollars in TARP money. Unless the current laws are changed or more pressure is put upon this institution the foreclosures will continue. People like me who are current on their mortgages will soon decide if holding on to a property that may never recover may not be worth it. I am the kind of person a bank should want to keep but now must make a financial calculation. Whether or not to take the hit on my credit now or later.

    Countrywide/Bank of America is an institution that cannot recover with all of its bad loans. As painful as this may, nationalization of Bank of America may be necessary. Temporary wiping out all the share holders maybe the best hope for people facing the foreclosure and will force the bank to comply with Obama’s Plan.

    With the current leadership structure at this institution and the amounts of bad debt on their books they cannot be trusted to follow suggested policy now, or in the future. Bank of America the poster child for bad no doc loans.

    The president must hold this institution to task and if they refuse, force the issue.

    • http://GetOutOfDebt.org Steve Rhode

      Jared,

      I wish your situation was rare and isolated, it’s not. The general public finds it hard to believe that a Bank of America representative would advise you to fall behind on your mortgage, but the rep is just trying to play the B of A system to get you in a program that works.

      Most often the hardest thing for people to do is to honor their promises to the lender when the lenders put seemingly every roadblock in the way.

      It is an unfair and crazy system. Yes it is.

      Steve

    • http://pulse.yahoo.com/_RVRESSOWLTH43EKZC4VNV7465U Athena

      I know exactly what you mean my husband and I are severly underwater in our loan and our whole culdesac has foreclosed because of it. Our property is not worth what we payed and the whole community value has decreased signifigantly.We have not payed in a year because we were advised they would not help us if we were paying. We now have terrible credit,( before we had never been even late on anything)and the Bof A wont modify our loan according to its value. Oh they said there going to modify it but of course all there doing is lowering the payment and making the loan last for 40 years instead of 30. I have been working with NACA and have not had any luck with them either, I have almost lost all hope. The only thing that is keeping me is my faith in GOD. I live in AZ and I have heard that we are one of the five states to hit the hardest with the foreclosure crisis im hoping our government will do somthing about it soon, but not counting on it. Good luck and God Bless…

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