Q. A borrower has a loan that was originated by Bank of America and guaranteed by FHA and is now over 4 years in arrears. If the borrower is over 30% in arrears of unpaid principal balance, does the borrower have a chance for modification?
For FHA HAMP, the maximum partial claim allowed is 30% of the unpaid principal balance. Therefore, if the arrears are above 30%, the borrower will have to come up with the difference between the 30% maximum partial claim and the arrears to be considered for FHA HAMP. It does not automatically disqualify for an FHA HAMP modification. Also there is no maximum amount of arrears that can be added to unpaid principal balance under the rules of Standard FHA Modification.
Additionally, many FHA guaranteed loans have been sold, and the investors that are buying them do not want the homes, so they are offering better modifications than were allowable under FHA HAMP or Standard Modification. There have been instances where modifications were received that were formerly guaranteed by FHA where investors actually modified the loan to 31% with principal reduction down to the property value, per the modification the first step was to grant principal reduction, then drop rate. Term that are similar to National Mortgage Settlement and Ocwen Modifications.
We will discussing this scenario as well as many other real-world situations in our upcoming Loan Modification Boot Camp, October 17 – 19, 2014. You can read about it here.