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Jacqueline Alicia Salcines

CHANGES IN FHA MORTGAGE RELIEF SHOULD ALLOW MORE BORROWERS TO SAVE THEIR HOMES

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Recent changes in the handling of FHA loans under the Making Homes Affordable Program under the Home Affordable Modification Program, has now made it significantly easier for underwater homeowners with FHA loans to qualify. Many obstacles and requirements were removed, making those with FHA loans that were previously turned down or ineligible to now qualify. These key changes have paved the way for millions of borrowers who were once denied, to now be eligible for a loan modification under the Home Affordable Modification Program / Making Homes Affordable.

These significant changes explained in detail under the United States Department of Housing and Urban Development (HUD) Mortgagee Letter 2012-22 requires that "lenders must begin to assess mortgagors in default under FHA's loss mitigation priority order and policies herein" within 90 days of the letter which is dated November 16, 2012.

What do the key changes mean for borrowers? Well, among other things the following:

1. Eliminates the requirement that the mortgage be no more than 12 months past due. This was one of the most significant changes. Previously, on FHA loans that borrowers had stopped paying and tried to obtain a loan modification under the Making Homes Affordable, if they were more than 12 months past due, they were turned down as ineligible. This is now removed and the borrowers that need the most help may now apply and qualify.

2. Permits Borrowers who defaulted on a prior Modification Trial Period to re-apply under FHA-HAMP. Previously, HAMP was considered a "once in a lifetime" modification. If a borrower was lucky enough to get it once, but inadvertently failed to make a payment or a change in circumstance caused them to default, they were not permitted to reapply. Rather the lender could only consider them for an in house modification at the lenders discretion. Now, borrowers that have defaulted on a prior trial period are free to reapply.

3. Eliminates the FHA-HAMP Back End Debt-to Income Ratio requirement of 55 percent. This is a calculation that we make in our office to determine if a borrower with an FHA loan is eligible. Primarily, the borrower would not be considered and would be ineligible for a HAMP modification if his or her monthly housing costs including PITI (principal, interest, taxes and insurance) consisted of more than 55% of their monthly gross income. Now, this rule is removed and borrowers who were once turned down may now qualify.

These are just a few of the changes made under the FHA Mortgage Relief/Loss Mitigation new rules. As always, we encourage homeowners to speak with qualified professionals such as our firm to see whether you qualify before submitting documents to the lender.

Often times, borrowers believe they know how to fill out the RMA (Request for Modification and Affidavit) forms and do so, only to be turned down by the lender after months and months, because the calculations were done incorrectly.

At my firm, we have the privilege of possessing computer programs with built in calculations used by the Making Homes Affordable and Home Affordable Modification Program which allow us to qualify individuals right in our office. Once we run the numbers and know what the borrower is eligible for, we know exactly what the lender is or is not required to do.

This is how we have been able to modify such a large number of client loans with great satisfaction.

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