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

by Lisa
(Massachusetts)

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.