STREAMLINE MODIFICATION PROGRAM (SMP)

This Program will MODIFY your Mortgage and make it Affordable for You. Changes in Terms, Interest, etc are Options

The government ( Federal Housing Finance Agency FHFA), Freddie Mac, Fannie Mae and other lenders that are member of the Hope Now Alliance have just launched ane STREAMLINE MODIFICATION PROGRAM (SMP) that is directed to help homeowners late in payments . It is the goal of the new program ( SMP) to provide borrowers with an affordable monthly payment that will allow them to save their house from foreclosure.

The difference between a normal Loan Modification and the Streamlined Process is that the SMP will require that the borrower signs just a single document to start.  A new loan payment will be established for a 3 months trial period.  If the borrower makes the new payments during the trial period the loan will be modified with the new terms.  The new modified mortgage will be insured by the FHA.

The Streamline Modification Programs gives lots of flexibility to the banks to establish favorable terms so the mortgage payment is affordable for the borrower(s).

Some of the terms of the mortgage that the banks can modify are:

• Change of the Interest Rate
• Change of the length of the life of the Mortgage  ( up to 40 years)
• Postpone the payment of the principal or part of it.

How the Process to Apply for the SMP Works?  What to Expect?

First if you are at least 3 months late in your payment you should qualify for the Streamline Modification Program.  Please contact your lender and ask them if they are working with the program.  If you have called them before and they said that they didn’t work with government programs please call again.  Things are changing by the day and the rules for the lender of how to work with this program were published just on December 15!

If your lender do not work with these program or don’t offer the program to you look for somebody else. 

If your lender or servicer considers that you may qualify for the SMP they will send you a letter inviting you to apply.  They will be asking you information about your income.

Once you have send them the income information, they will send you the SMP Agreement (Multistate Streamlined Modification Program Loan Workout Plan and Modification Agreement)  .
You need to return the agreement with the first trial payment and the other documents that they are asking you for.   At this moment the servicer will determined if you are eligible to participate in the Streamline Modification Program.  If you are, they will sign the SMP agreement and return it to you letting you know that the trial period has begun. If you are not eligible… you probably will end up in foreclosure or will have to apply to other program.

After 3 months (trial period) or you successfully paying the new mortgage payment your mortgage is formally modified.  Now all the terms that were offered to you using the SMP are in effect.   Remember after 3 months.

Who is Eligible for the Streamline Modification Program?

1. Your mortgage IS owned or backed by Fannie Mae, Freddie Mac and other participants ( you need to call your lender to know if your mortgage qualify) but NOT insured by any government agency ( FHA, VA, HUD or Rural Development)
2. The mortgage was originated (issue) before January 1, 2008
3. The mortgage is at least three full months past due.  Mortgage in foreclosure also qualify
4. The house is OCCUPIED by the owner and it is his/her only home
5. The mortgage value is MORE than 90% of what the house is worth ( appraised value) – to have an idea about the value of your house you can use zillow or any other website that provide home value estimates. 
6. The reason for the borrower to be late in his payments has to be in financial hardship ( You will ask you to fill out a Hardship Affidavit)
7. the actual mortgage is NOT a daily simple interest mortgage loan ( check your mortgage documents )
8. The borrower is NOT in bankruptcy proceedings
9. The borrower is NOT in any litigation regarding the mortgage.  Foreclosure is O.K.

You are ALSO eligible if:

• The Mortgage  was modified before , but meet the above eligibility requirements.
• The house has second mortgages, third mortgages, and home equity loans,  HELOC's  or any junior mortgage liens. You don’t need to satisfy the outstanding junior liens.  The junior liens are not considered when calculating the Loan to Mortgage Value or the new monthly payment under the Streamlined Modification Program.

What Mortgages are NOT eligible?

* Mortgages of houses of more than one unit ( duplex, quadruplex, etc)
* Mortgage of second homes
* Mortgages where the borrower is working in a repayment plan that is better than the SMP ( this is determined by the servicer but if you think that the SMP is better you should apply)
* FHA, VA and RHS-guaranteed Mortgages

What they need to determined if you are eligible?

• They will want to see documents for property taxes, property and flood insurance premiums, and monthly HOA/condominium fees
• Documents of your CURRENT  income.  The income that is stated or supported by documentation that is not more than 90 days old.  You will need to provide them with the most recent paystub or federal income tax return ( if you are self-employed)
• Agreement and Hardship Affidavit ( I am posting the documents that you will be required to fill out and signed) .
• If you don’t have any documents supporting your income you can just tell them what your income is.

The servicer may NOT  require a borrower to make an up-front cash contribution (other than the first trial period payment) in order for a borrower to be considered for the SMP.

What will the New Mortgage Payment Be?

The new payment will be MAXIMUM 38% of your income.  This 38% or less has to be enough to cover the monthly payment of principal, interest, property taxes, hazard insurance, flood insurance, mortgage insurance, condominium association
fees and homeowner’s association (HOA) fees. 

If you are thinking in apply for the Streamline Modification Program is because you are late and the payment is more than 38% of your income.  So how will they make the payment just 38% and at the same time include taxes, insurance, etc? 
Here is how:

1. They will capitalize (add to the principal) all the interest,  out-of-pocket escrow advances and other costs and recalculate the new payment.  The late fees and penalties are not capitalized.  They HAVE TO be waived by the lender.
2. If still the new payment is not 38% of your income they will extend the term of the mortgage by up to 40 years.  Negative amortization following the effective date of the modification is prohibited. Calculate the new monthly payment.
3. If still the new payment is not 38% of your income they will adjust the interest rate.  . If the loan is an ARM, the interest rate will be set at the current interest rate (the note rate). The lowest interest rate in all cases is 3.0 percent for up to 5 years.   The interest rate has to be at or above market value ( There are some more rules to calculate the interest rate that I am not posting here) Calculate the new monthly payment.
4. If still the new payment is not 38% of your income they will provide “principal forbearance”.  The borrower will pay the amount of principal forbearance when the house is sold or at the end of the 40 years.  They will NOT charge you interest for this principal forbearance.  Principal write-downs or principal forgiveness is prohibited

How to apply to the Streamline Modification Program

Now that you know how the process works, what the eligibility criteria is you can apply, but with whom?

• Your lender or servicer if they are eligible to participate or
• All Fannie Mae, Freddie Mac and Hope Now approved servicers are eligible to participate.  If you want us to put you in contact with one please fill out the form on the right (choose the long form).

QUESTIONS AND ANSWERS ON THE STREAMLINED MODIFICATION PROGRAM

Q: What is a modification?

A: A modification is a change to the original mortgage terms. It may include a change to the product (an ARM to a fixed rate mortgage), interest rate, amortization term and maturity date, and/or unpaid principal balance. The change/s is made to create a more affordable payment for the borrower.

Q: What is a streamlined modification?

A: A streamlined modification is a modification that requires less documentation and less processing. In this case, the streamlined modification seeks to create a monthly mortgage payment that is sustainable for troubled borrowers by targeting a benchmark ratio of housing payment to monthly gross household income.

Q: What is the benchmark ratio?

A: This is the first time the industry has agreed on an industry standard. The benchmark ratio for calculating the affordable payment is 38 percent of monthly gross household income. Once the affordable payment is determined, there are several steps the servicer can take to create that payment – extending the term, reducing the interest rate, and forbearing interest. In the event that the affordable payment is still beyond the borrower’s means, the borrower’s situation will be reviewed on a case-by-case basis using a cash flow budget.

Q: Who participated in creating the Streamlined Modification Program? Is this identical to the FDIC’s IndyMac protocol?

A: It uses the same fundamental tools to achieve the same affordability target.

Q: How is this different from Citi’s announcement today?

A: This effort compliments efforts of those banks that have mortgage portfolios and can reach out directly to borrowers for loans they own and service. This is a significant announcement in that Fannie Mae, Freddie Mac and FHFA have mutually agreed as major investors to a single streamlined modification program with a common affordability standard. The majority of HOPE NOW banks who own portfolio mortgages will adopt or offer programs as or more aggressive then what’s being announced.
In HopeNowMortgages.com we will be posting the new programs that city bank and other big lenders are creating for their customers.

Q: What is the role of HOPE NOW?

A: HOPE NOW has the leading servicers as members. HOPE NOW collaborated with Fannie Mae, Freddie Mac and FHFA on arriving at a standard that is consistent and addresses the capacity challenge for servicers dealing with increased delinquencies. This will take on-going work to implement for servicers. We anticipate this being implemented by December 15th. If you want to know which Hope Now Agencies are close to you please fill out the form on the right. You will see the list immediately.

Q: Why is there not a foreclosure moratorium?

A: Any borrower who qualifies and responds to the servicer will be given the opportunity to provide the required information for consideration. If necessary, the scheduling of a foreclosure sale will be suspended. A suspension requires that the borrower maintain contact, desires to keep his or her home, has the ability to make the affordable payment offered, and promptly respond to requests for information and signed documents.

Q: Why is it necessary?

A: With the rise in serious delinquencies and increasing number of loans in foreclosure, this program will help borrowers who have missed three or more payments, but want to keep their homes. Because the eligibility requirements and process are streamlined and consistent, the program will allow servicers to reach more borrowers more quickly.

Q: Who is eligible?

A: The highest risk borrower, who has missed three payments or more, owns and occupies the property as a primary residence, and has not filed bankruptcy. The loan is a Freddie Mac, Fannie Mae or portfolio loan with participating investors. To qualify for the streamlined modification, the borrower must certify that he or she experienced a hardship or change in financial circumstances, and did not purposely default to obtain a modification.

Q: Why must the borrower be 90 days delinquent? Why not earlier in the delinquency cycle?

A: This is a streamlined solution targeted to reach the most at risk borrower. For borrowers who do not qualify, other solutions are available. This in no way substitutes for the meaningful efforts by all servicers and investors that are currently in place. The 212,000 workouts reported by HOPE NOIW in September are testimony to that fact. We will continue to see those efforts produce meaningful results.

Q: How many people will this help?

A: While difficult to assess, it is clear delinquencies are predicted to continue well into 2009. Foreclosure estimates are significant. Having a streamlined approach will assist many borrowers who default and more quickly. We estimate this will ultimately help thousands of borrowers.

Q: What if a borrower is not eligible but still wants to save his/her home?

A: If the servicer is unable to create an affordable payment with this streamlined program, it will further evaluate the borrower’s situation via the standard process. The standard modification program requires a personal cash-flow budget customized to the borrower’s situation.

Q: How do borrowers apply?

A: To be considered for the program, a seriously delinquent borrower should contact his or her servicer and provide the requested information – monthly gross household income, association dues and fees, and a hardship statement.

Q: How do borrowers complete the modification process?

A: Upon receiving the Modification Agreement from the servicer, the borrower signs it and returns it with the 1st payment at the modified terms along with income verification. Once the borrower makes three payments at the modified terms and the account is current as of day 90 of the modified plan, the modification is complete.

Q: What are the goals of the program?

First, we hope that other industry participants -- portfolio lenders and representatives of private label security investors – readily and rapidly adopt this program as the industry standard. Second, the program could increase the number of modifications significantly. Third, broad acceptance and effective implementation could stabilize communities and property values.

Q: When will servicers start offering this program?

A: We expect that by December 15th, servicers will be positioned to work with eligible borrowers.

Q: Will servicers get more details on this program?

A: Both Fannie Mae and Freddie Mac will be communicating directly with their approved servicers through an announcement, letter or bulletin.

the next one is the official press release from the HopeNow Alliace announcing the new program.

HOPE NOW JOINS WITH GOVERNMENT TO CREATE
STREAMLINED MORTGAGE MODIFICATION PLAN

SMP Is Important New Tool to Prevent Foreclosures
Washington, D.C. (November 11, 2008) – HOPE NOW, the private sector alliance of mortgage servicers, non-profits, counselors, and investors that has already helped almost 2.5 million homeowners avoid foreclosure, today announced that, working with the U.S. Treasury, the Federal Housing Finance Agency, Fannie Mae, Freddie Mac, and a number of major mortgage loan servicers, it has helped develop a new program that will make it easier and faster for the most at-risk homeowners to modify their mortgages and stay in their homes.

The “Streamlined Modification Plan,” or SMP, which is an expansion of what many lenders are already doing, will be implemented by December 15, 2008.

“This is an important effort by the mortgage industry to help homeowners,” said Faith Schwartz, HOPE NOW’s executive director. “This is a big step forward that will make it easier to modify loans for the most at-risk homeowners so they will be able to avoid foreclosure and stay in their homes.” Under the new SMP, lenders will use an expedited process to modify, or restructure, a mortgage so that the homeowner can afford the monthly payments. The streamlined process will apply to at-risk borrowers who are 90 days or more late on their existing mortgages and whose loans are owned by Freddie Mac, FNMA or participating balance sheet lenders/servicers.

After compiling the homeowner’s information, lenders will use a simple process that reduces the homeowner’s monthly payment to no more than 38 percent of the borrower’s monthly income. This may include in any combination (1) extending the number of years of the loan, (2) reducing the interest rate, and/or (3) forbearing part of the principal. If these steps are cannot reduce a homeowner’s monthly payment to that affordable level, the borrower will receive an additional loan-by-loan review that will include all other options to prevent foreclosure.

While many lenders have used some combination of these SMP components up to now, the real benefit of the program will be the systematic and uniform approach that lenders will now apply to modifications. This is expected to streamline the process significantly. According to Schwartz, SMP’s consistent guidelines and standards will make it much easier and faster for homeowners to get the assistance they need. “This effort compliments those being made by other institutions and should provide homeowners with real confidence that the mortgage lending industry wants to help them avoid foreclosure,” she said. “SMP will help stabilize the housing market.”

ABOUT HOPE NOW

HOPE NOW is the alliance of counselors, mortgage market participants, and mortgage servicers that is working to help as many homeowners as possible avoid foreclosure and stay in their homes. For more information, including a full list of members, go to www.hopenow.com

HOPE NOW coordinates a nationwide campaign to reach homeowners who may be at risk of losing their homes. So far, HOPE NOW has sent almost 1.9 million letters. About 17 percent of homeowners receiving the HOPE NOW-coordinated letters have contacted their servicer, 6 times more than the routine 2-3 percent response rate servicers receive when they send their own mailings.

In the past nine months, HOPE NOW has connected thousands of homeowners with their lender and/or a HUD-certified housing counselor at workshops in more than 20 cities. Additional workshops are being scheduled around the country. In addition, HOPE NOW members have agreed to make substantial additional efforts to contact homeowners whose mortgages will reset in the coming months and to further expedite the process used to determine how best to keep them in their homes. The Homeownership Preservation Foundation, a HOPE NOW member, operates the Homeowner’s HOPE The Homeowner’s HOPE™ Hotline receives an average of more than 7,000 calls a day. There is no cost to homeowners for contacting a nonprofit advisor. To see the address of your closest HOPENOW agency just fill out the form on the right. If you want to know if you qualify to other government programs and want us to let you know please check the box and fill out the long form.