Will We Be Denied a Permanent Loan Modification Because of Additional Income From Unemployment Benefits?

by Lisa

My lender is ASC/Wells Fargo. We were approved initally for a HAMP modification and are to begin making our trial payments (due 9/1, 10/1 and 11/1/2010). They calculated all of this using my income alone - my husband's unemployment income ran out and was waiting for congress to approve extended benefits. Our financial worksheet showed more expenses than income - I don't have the exact figures here, but with that info we were approved for the Trial Period under HAMP.

My husband just recently found out that he was approved for extended benefits through unemployment. I assume that at the end of the the trial period we will need to provide income documentation again and I am fairly certain that we will be over that 31% debt/income ratio guideline.

Any insight on what I can expect to happen if we report his unemployment when the time comes? Seriously, is he better off not receiving it at all? I don't want to leave my home- the foreclosure has been postponed from 8/16 to 10/16/2010. I will do anything to make this work out....

Mortgage Loan Modification Answer:

If your husband is on the loan, then his unemployment benefits will count as part of your total household income. Your lender may ask you during your trial loan
modification period if anything has changed with your finances, and you may have to disclose the additional income then.

However, each bank is different. I've heard it go both ways -- one, that once you've been approved, it doesn't matter how your finances change during the trial period. BUT, with my personal experience with Wells Fargo, they did ask me during our trial modification (for a non-HAMP loan mod) period if our financials changed. They hadn't but I asked the rep if they would have to reconsider our approval if we had new financial information, and I was told yes, they would have to take it into consideration.

This doesn't mean it will be the same for you. I highly recommend going back to your financial worksheet and see how much your husband's unemployment benefits will change your numbers and see if you have any additional expenses you can put down to offset his income.

Or, perhaps your husband can apply for his extended benefits after your trial period is finished and your permanent loan modification is finalized? See if that's possible.

Best of luck to you and your family.

Please come back and post your outcome so that visitors with a similar situation can benefit from any information you can share.

All the best to you.

Comments for Will We Be Denied a Permanent Loan Modification Because of Additional Income From Unemployment Benefits?

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Nov 20, 2010
Possible solution
by: GoingThruSameThing

I'm going through the same issue. My wife's unemployment benefits are the reason why I was denied modification, even though her benefits will expire in 3 months. I was making trial payment for 7 months in 2010 (??!!) and finally BoA told me that I do not qualify because I'm left with income at the end of the moth. Of course, they take only GROSS income into consideration. I filed an appeal and just by talking to the rep, I finally find out that since my wife is not on the loan, I don't have to include her unemployment for modification. Also, you have to specify that your spouse is NOT CONTRIBUTING to household expenses. In my case it was simple: my wife is paying for her car, gas, shopping ect. So, word of advise, double check with your bank to make sure that they note that fact about not contributing. Good luck.

Sep 03, 2010
Wells Fargo Trail Modification
by: Dean

Yes, I agree with the previous comments. Often times just completing the trial and making the payments on time is enough for them to send the permanent modification payments. After completing the trial modification payments, I would call and ask for the permanent modification papers. If there are requirements at that point they will tell you.

A word of caution. Be sure you get a loan transcript so you know what charges and fees are being rolled into the permanent loan. My experience is that mortgage servicers are very reluctant to provide that information. Maybe some one else can comment. But to my knowledge there are no "truth in lending" disclosures that apply to these modifications.

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