Fannie Mae has instructed its servicers to consider its new Alternative Modification (Alt Mod) prior to foreclosing on borrowers who have made trial payments under the Home Affordable Modification Program (HAMP) but have been denied permanent modifications.
To be eligible, a mortgage must have first been reviewed and evaluated for HAMP, and its trial period must have been initiated prior to March 1. The borrower must have made all required payments in accordance with a HAMP trial period plan, including subsequent payments that may have been due while the servicer attempted to convert the trial period to a permanent modification, according to Fannie's Lender Letter 2010-04.
The Alt Mod may be considered if the monthly mortgage payment ratio based on verified income was less than 31%, the 31% ratio could not be reached using the standard HAMP modification waterfall, or if the borrower failed to provide all income documentation required for a HAMP modification but the documentation meets the Alt Mod's streamlined income documentation requirements, Fannie says.
The Alt Mod offer must clearly indicate that, while the Alt Mod contains the same payment terms as the HAMP modification, the borrower did not meet the requirements of HAMP, and as a result, the Alt Mod does not include borrower incentive payments that are otherwise payable under HAMP, the letter says.
Servicers receive $800 for each completed modification.
SOURCE: Fannie Mae