HAMP Loan Modification Denied under "Investor Guidelines"
(Philadelphia, PA, USA)
I have a loan under ASC and I think owned by Wells Fargo. I was told that I did not get approved because I even though they extended my 5yr interest Only ARM (30 yr) to a 40 yr fixed P&I term with 4.5%, that I was still over my payments by 1.3%
I asked why they couldn't go any lower than 4.5%. I did my calculations before I applied and made sure that I would qualify. I have a gross income of about $3433 and my monthly deduction is $1624 (daily/business expenses and mortage, insurance and tax included). I am self-employed so this was all done under three month average. I knew that the mortgage payment of $1184 took 34% of my gross, so I wasn't really that over 31%. What happened? I think I should have gotten approved but they keep saying that they went under investor guidelines. Any help would be greatly appreciated, thanks.Mortgage Loan Modification Answer:
I'm not entirely sure what you mean by "...that I was still over my payments by 1.3%"
If you mean that your lender denied your loan modification application because based on their calculations of a lower fixed rate and longer term, that you would still have a deficit of 1.3%, then I would say that is pretty darn close!
I would suggest going back to the negotiator you've been dealing with and ask for a full accounting/explantion, in writing, which should include the figures they used for your income and expenses. This is important because, as you mentioned, there is a discrepancy with their calculation from yours. I certainly think that 1.3% should be easily adjusted either from your income perspective or your expenses in order to close the gap.
You also mention that your mortgage payment is only 34% of your gross income. The HAMP guidelines state that you must use the sum of your monthly mortgage payment, property tax, insurance, and association dues. Once you add all that, the total will definitely be higher than 34%, which would increase your chances of qualifying for a HAMP loan modification.
It sounds like the denial of your loan modification application may not have been based on HAMP guidelines due to the fact that they would not go lower than 4.5%. Lenders do have the ability to reduce your interest rate to as low as 2% on the HAMP program (as well as on a traditional loan modification at their own discretion).
If Wells Fargo is in fact the owner (or investor) of your loan, they definitely are participants of the HAMP program. It sounds like you were negotiating your loan modification on your own without a third party representing you. If so, go back to your contact at your lender and ask specifically which loan modification program they used to qualify you.
If they tried to qualify you under their own traditional loan modification
program, then ask to resubmit under HAMP. My question is why didn't they try HAMP in the first place since Wells Fargo is a participant.
It seems with your case, that your lender could have used different combinations of interest rate, term, and interest only payments vs P&I to come up with a viable modification offer that you can easily afford.
Keep in mind, however, that your lender's main objective is to minimize their financial loss. This why they base their loan modification approvals/denials on whether it would be cheaper to modify or to foreclose. Without knowing your entire situation - level of hardship, property value, loan amount, whether you are delinquent or not, it is a little challenging to give you a more complete assessment.
Unfortunately, each lender and each negotiator is different and have their own biases, but that doesn't mean they don't have to comply to mandated guidelines. I honestly think your lender can do much better.
Like I mentioned above, I recommend asking for a full explanation, in writing, of why your loan modification was denied and that their explanation must include what figures they used to calculate your income and expenses. Lenders have been known to sometimes include or exclude information you've sent them when making their decision. FURTHER GUIDANCE
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If you have further questions, please feel free to post again.