How To Calculate Your HAMP Home Affordable Modification Program Like Your Lender Does.

BY Anna Cuevas; The Loan Mod Guru

Help Me Please!

Trying to navigate the tedious job of trying to modify your own loan is frustrating enough find some time to sit in silence and regroup your inner peace this way you can find the strength within you to carry on and be successful with your goals while maintaining a positive outlook and attitude.

Patience is important and I want to prepare you that even if for some

reason you are denied you can find out why with the recent changes 1/1/10

the servicer MUST tell you why you were denied, you can make the necessary

changes and then reapply.

This is what the lenders do to calculate:

You need to know exactly how much your total PreTax (gross) income is-

they will use a percentage of 31% that will be the basis of your NEW

MODIFIED PAYMENT including mortgage payment for your first loan only,

property taxes, homeowners insurance, and Homeowners Association dues – so

you must gather this information too * The total MODIFIED mortgage payment

CANNOT exceed 31% of your gross income.

You need to answer these questions:

What is your gross income (before taxes)? Multiply the Gross not the Net by

31% ( this is what they call 31% DTI (Debt to Income Ratio)

Take the 31% this is the MAXIMUM TOTAL payment that HAMP will allow- if

your current payment is already UNDER this figure your modification under

HAMP will not be approved.

What are the monthly Homeowners insurance, Property Taxes, HOA fees?  Then,

deduct  this from the above 31% figure

The balance is Maximum your 1st Mortgage Payment can be.

NEXT:  How does the lender get you to that Maximum 1st Mortgage Payment

For the lender to arrive at the modified payment the first step will be for

your lender to

First they may lower your rate down to: as low as 2% start rate

Next,they may extend the term of your mortgage to 40 years in order to

lower the payment to get you to 31% – then, if this is not enough to get your payment to 31% then:

If necessary, the servicer must provide for principal forbearance to achieve the target monthly mortgage payment ratio. The principal forbearance amount is non-interest bearing and non-amortizing. The amount of principal forbearance will result in a balloon payment fully due and payable upon the earliest of the borrower’s transfer of the property, payoff of the interest bearing unpaid principal balance (UPB) or maturity of the mortgage loan. The modified interest- bearing balance (i.e., the unpaid principal balance excluding the deferred principal balloon amount) must create a current mark-to-market LTV (current LTV based upon the new valuation) greater than or equal to 100 percent if the result of the NPV test is negative.

**KEEP in mind, only a very low percentage of lenders

will do this, do not have high expectations of this because most likely you

will be let down) the lender may defer some of the balance and not charge

interest on a portion of the balance, payable when you refinance, at the

end of the term of the mortgage, or upon sale or refinance.  If your

maximum payment did not get to 31% of your gross income using step 1 and 2

and your lender does not subscribe to deferring principle then your HAMP

loan modification request can possibly qualify for another internal

program, or denied, if denied then you need to increase your income, try to

lower your insurance and property taxes, if possible and then reapply and

let your lender know you have new information to submit.  Keep your

timeline in mind at all times and don’t forget to write down names,

departments, and dates.

Keep this example in mind – let’s say your gross income is $2000 per month

x 31%   is $660 – (the original payment was $1500 per month, for example)

and the homeowners insurance and taxes are $500 your lender is NOT going to

give you a ONLY an allowable $160 MORTGAGE payment  to arrive at the $660

maximum total modified payment because the payment includes the insurance

and taxes and HOA- it is important to be realistic and work out your


* this is key – as an example scenario if they were to say the loan failed

NPV Net Present Value test what that is in a nut shell is that according to

a specific formula (NPV) it is more profitable to foreclose then to modify

the loan.  In the example I listed here if they were to let someone go down

to a $160 per month payment then obviously foreclosing would be more

profitable if lets say the home was worth 200,000 they would gain more

profit selling the home after foreclosure then agreeing to take such a

drastic payment reduction.

Work on finding opportunities to increase your income if it is too low to

qualify or you if you have been denied – Ask questions and get the exact

detailed numbers they used and the reason for your denial. This way you can

reapply when you can increase your income.

They do not use your expenses or credit card debt into these figures

(called ratios) but if you carry a large credit debt load you will be

referred to credit counseling- I would also suggest debt settlement if you

are already late on your other bills as well.

My advice is to please be prepared to be patient, yet commit to a positive

mindset and commit to not give up and make the calls, take the action, and

do the work if you are going to do this yourself you need to be your own

advocate and provide yourself with first class customer service.  This

means get yourself organized and go above and beyond even if it takes a few

no’s to get to the yes.  Analyze your financial situation, make the

necessary cutbacks, make a commitment to give this your all and that means

to work on your mindset and remain as calm as possible so you can be

successful at modifying your own mortgage loan.

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