Mortgage Modification Questions

Mortgage Modification
	Inform Yourself Before You Talk To Your Lender

Mortgage Modification Questions from HUD

Question 1: In utilizing the mortgage modification option to bring an asset current, can the mortgagee include all fees and corporate advances?
Answer: Mortgage Letter 2008-21 states in part: Legal fees and related foreclosure costs for work actually completed and applicable to the current default episode may be capitalized into the modified principal balance.

Question 2: Is a Mortgage Modification Agreement Permanent?
Answer: A mortgage modification is a permanent change in one or more of the terms of a mortgagor's loan, allows the mortgage loan to be reinstated and results in a payment the mortgagor can afford.

Question 3: May a mortgagee perform an interior inspection of the property if they have concerns about the property's condition?
Answer: Yes, the mortgagee may conduct any review it deems necessary to verify that the property has no physical conditions which adversely impact the mortgagor's continued ability to support the modified mortgage payment.

Question 4: Can a mortgagee include late charges in the loan modification?
Answer: Mortgagee letter 2008-21 states that accrued late charges should be waived by the mortgagee at the time of the loan modification.

Question 5: When utilizing a mortgage modification option, can a mortgagee capitalize an escrow advance for homeowner's association fees?
Answer: HUD Handbook 4330.1 REV-5, Paragraph 2-1, Section B, Escrow obligation states: Mortgagees must also escrow funds for those items which, if not paid, would create liens on the property positioned ahead of the FHA-insured mortgage.

Question 6: Is there a new basis interest rate which mortgagees may assess when completing a mortgage modification?
Answer: Yes, Mortgagee Letter 2008-21 States that the new basis interest rate is 200 points above the monthly average yield on U.S. Treasury Securities, adjusted to a constant maturity of 10 years.

Question 7: Will HUD subordinate a partial clam, should a mortgagor subsequently default and qualify for a mortgage modification?
Answer: If a mortgagor subsequently defaults and qualifies for a mortgage modification, HUD will subordinate the partial claim.

Question 8: Are mortgagees required to perform an escrow analysis when completing a loan modification?
Answer: Yes, mortgagees are to perform a retroactive escrow analysis at the time the loan modification to ensure that the delinquent payments being capitalized reflect the actual escrow requirements required for those months capitalized.

Question 9: Is the mortgagor eligible for the upfront premium refund at payoff of a modified loan?
Answer: It depends upon when the closing date occurred. For assets closed:
      After July 1, 1991 but before January 1, 2001, the 7-year unearned premium refund schedule shown in Mortgagee Letter 1994-1 remains in effect,
     On or after January 1, 2001 that are subsequently refinanced, the 5 year refund schedule shown in the attachment of mortgagee letter 2000-46 applies, or
     On or after December 8, 2004, refunds of upfront MIP are eliminated except, when the mortgagor refinances to another FHA insured mortgage. The refund schedule attached to mortgage letter 2005-03 has been modified to a 3-year period.

Question 10: Do all mortgage companies have a mortgage modification program?
Answer: No all. But things are changing daily so keep calling your mortgage company.

Question 11: Can a mortgagee qualify an asset for the loan modification option when the mortgagor is unemployed, the spouse is employed, but the spouse name is not on the mortgage?
Answer: Based upon this scenario, the mortgagee should conduct a financial review of the household income and expenses to determine if surplus income is sufficient to meet the new modified mortgage payment, but insufficient to pay back the arrearage. Once this process has been completed the mortgagee should then consult with their legal counsel to determine if the asset is eligible for a mortgage modification since the spouse is not on the original mortgage.