Assist2Sell

In February, the number of modifications that were considered "permanent" increased 45% over January. But the cold fact is that some homeowners won’t qualify for long-term relief even after successfully making their trial payments – whether it’s because of insufficient documentation during the final application process or because once income is verified, their debt-to-income ratio pushes them out of the qualifying bracket.  To offer these homeowners another option, Fannie Mae is instituting the “Alternative Modification” (Alt Mod) and requiring all its servicers to evaluate a borrower for the new solution before proceeding with foreclosure.   In a letter to lenders Thursday, Fannie explained that the Alt Mod is “an alternative to the HAMP modification for those borrowers who were eligible for and accepted into a HAMP trial period plan but were subsequently not offered a permanent HAMP modification because of eligibility restrictions.”

For mortgage loans in active HAMP trials initiated prior to March 1, 2010, all Fannie Mae-approved servicers must consider the Alt Mod prior to the initiation of foreclosure for all eligible borrowers who were not offered a permanent HAMP modification after making all required trial payments.  In addition to HAMP evaluation and fulfillment of trial payments, one of the following is required for eligibility:

- The monthly mortgage payment ratio based on verified income was less than 31%.
- The target monthly mortgage payment ratio of 31% based on verified income could not be reached using the standard HAMP modification waterfall.
- The borrower failed to provide all income documentation required for a HAMP modification but meets the streamlined income documentation requirements outlined by Fannie.