Fannie and Freddie Launch Flex Modification Program: No Paperwork Required in Some Cases

By the Lending Lies Team

Fannie Mae and Freddie Mac have launched a new loan modification program for troubled mortgages known as “Flex Modification.”  The GSE’s have an issue with rising defaults and questionable paperwork and the Flex Modification allows them to modify the underlying defective “loan” and gloss over the false endorsements, assignments and chain of title issues.  Brilliant!

The new flexible loss mitigation tool is a combination of the impotent HAMP,  the Standard Modification, and the Streamlined Modification, and will replace the trio as early as March 2017.

Loan servicers are beginning to implement the Flex Modification at that time, but will be required to participate starting October 1st, 2017.

The Home Affordable Modification Program (HAMP) expired at the end of December.

How the Flex Modification Works

It is obvious that Fannie and Freddie are attempting to lure as many homeowners in or near default inot the Flex Modification program.  Unlike the original HAMP modifications that required burdensome amounts of paperwork (that was intentionally lost), the required borrower documentation needed to get a loan modification under this new program is surprisingly minimal.

A major problem with HAMP was the complicated paperwork and long, drawn out processes.  Not to mention that loan servicers who had little incentive to modify a loan when they could foreclose, typically threw the homeowner’s application into the trash.

HAMP has been revised to make it easier for borrowers to get relief, and it appears those lessons have been applied to the new Flex Modification, at least in theory.  However, the reality is that a servicer who illegally forecloses on a home receives a financial windfall, compared to a paltry fee for modifying.

Fannie and Freddie claim that the Flex Modification will aim to lower monthly housing payments to help at-risk, delinquent borrowers avoid foreclosure.

Those who are less than 90 days behind on their mortgage must submit a Borrower Response Package (BRP) in order to be evaluated for a Flex Modification, which will target a 20% monthly payment reduction and a 40% Housing Expense-to-Income (HTI) Ratio.  Why such aggressive measures when the previous HAMP program would rarely reduce principal or monthly payments?  The GSE’s have always been hostile to homeowners wishing to modify preferring to foreclose.  Less than 40% of all applicants were given loan modifications.

Freddie Mac noted that a “high percentage” of those at least 60 days delinquent would be eligible, and in some cases it could also be an option for those who are current on the mortgage or less than 60 days late.

However, that latter group would need to occupy their homes in order to get relief.

For those more than 90+ days delinquent, the program targets the same 20% payment reduction, but requires no “borrower documentation.”

Likely this program will be used to grease the runways, as Timothy Geitner of the Fed admitted back in 2008 when HAMP was devised.   It appears that the GSEs know they have MAJOR issues with the underlying loans they guarantee and they are resorting to issuing modifications to wipe the slate clean.  I predict that there is language in the agreement that states the homeowner will not sue their servicer or the GSE’s once the loan is modified.  The GSEs, Fed and OCC are not benevolent entities- they are cold, calculating bankers where profit is all that matters.

In other words, they realize you’re in imminent danger of foreclosure and that they have major legal liabilities so they’re going to make it easy for you to get assistance.   Without knowing more about the program I can already tell it doesn’t pass the sniff test.

Perhaps this program will actually provide relief by lowering monthly mortgage payments.  It is likely that borrowers will be incentivized to hit the 90 day plus delinquent status to take advantage of the easier modification option also.  Not that it matters because the entire program appears to be created to “fix” loans that are damaged beyond repair.

It is interesting that many loan servicers are exiting the market while the GSEs are attempting to paper over their fraudulent history.  There are unseen forces in the background that are influencing change.  It appears that servicers and faux lenders are running scared or do they know something we don’t?

In any case, the program will also allow for principal forbearance to an 80% mark-to-market loan-to-value ratio (MTMLTV), but this amount must not exceed 30% of the unpaid principal balance.

Some key changes from the Standard Modification include:

• Housing-to-income ratio for borrowers less than 90 days delinquent changed from less than/equal to 55% to 40%
• No amortization choice for borrowers with an MTMLTV ratio of less than 80%
• Must now forbear principal down to a 100% MTMLTV ratio rather than the prior 115%

Flex Modification Eligibility

– Mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac (GSEs do not own loans)
– Must be 60 or more days delinquent unless owner-occupied and in imminent default
– Must submit a Borrower Response Package (will the servicer actually process the package when they have more incentive to foreclose than modify?)
– Must have an eligible hardship
– Must verify income
– Must have been originated 12 months prior to evaluation date
– Must target a 20% principal and interest payment reduction and 40% front-end DTI
*If 90 days+ delinquent, a Borrower Response Package is not required, and servicer is not required to confirm a borrower’s hardship or income.

Ineligible for Flex Modification

– FHA, VA, and USDA loans
– Mortgages subject to recourse
– Mortgages secured by second homes or investment properties less than 60 days late
– Mortgages that have been modified three or more times previously
– Mortgages approved for a short sale or deed-in-lieu
– Mortgages under a different modification program
– Mortgages that don’t make it through the trial period or aren’t brought current

13 Responses

  1. Where will interest rates be in Oct 2017? Possibly higher that the rates of those who’d like to do a HARP now but can’t for some reason.

  2. I’ve decided I’m going to file an emergency motion to dismiss the complaint and vacate the Sheriffs Sale due to fraud and lack of standing (trying to buy time for my Appeal to be decided) since only fraud and lack of standing motions can stop a sheriffs sale.

    Even though these were raised in my answer, the court failed to properly address these 2 issues and I am demanding that they be addressed before a sale is completed. The Appellate Division and court ruled both state that fraud or lack of standing are issues that can undo a final judgment..l.

    Now …the tricky part is how to make my argument compelling so that it will force the court to make the servicer prove standing ..besides just having them rely upon presumptions that the fraud assignment and note are valid enough proof of standing …

  3. Personally I think even applying or HAMP is what put me on the “target” list of someone who might be vulnerable. I talked to an attorney last week and even though I have no recorded assignments, robo signatures, etc unless I have 50K to use for the fight, I’m stuck. They win again! I am so sad there is NO ONE in our government that has done anything for the victims! They even appointed a foreclosure king to a cabinet position in the administration.

  4. Acknowledgment thst bankster fraud business model continues w requirement myst b originated past 12 mos? One of the traps w settlements, influence of real estate professionals etc is that mortgage fraud refers to fraud by borrower. But worth a try they’ve been advised.

  5. I agree with Ronda Scott above. I originally believed the government and//or the judicial system would SURELY stop the banks from this racket they have been practicing on homeowners, the size of it is so big, how could it possibily be comtemplated to “cover it up”? Yet that is what happened! It is crime, it is theft of equity, pure and simple.
    Everyone in the system who allowed it to happen or helped it happen should be going to jail. The homeowners are innocent victims. But even the lawyers have no mercy and are afraid to do right and help the homeowners or raise issues with the Bar about it. Has to be bilked for what all money the lawyers can get out of the situation, one poor homeowner at the time, and if only a few homeowners can be helped while the rest lose what essentially is their life savings, well, the lawyers’ attitudes is, that is just too bad.

  6. I just went onto the Fannie Mae website since they allegedly own my loan according to the servicer Wells Fargo paperwork … So I found a section where fraud can be reported …its probably meant for employees who come across any fraud …but I clicked the box that said “wish to remain anonymous” ..filled out the report about my loan number being serviced by Wells Fargo and that documents were fraudulently fabricated ..the note and the assignment …and submitted it into their fraud department to be investigated .. Hoping it causes a possible problem for Wells Fargo and their corrupt law firm….

    Thank you for contacting the Mortgage Fraud Program. We may contact you if additional information is needed, however, we are unable to provide you with updates on the disposition of you submission.
    Here is the Confirmation number:INC-21987
    Do you have any attachment(s) for related Mortgage Fraud? if Yes, click on Checkbox, else click Cancel to exit.

  7. Rhonda scot o don’t know why, I wish they would just do what Iceland did. it would be great for the economy. we caould all sell and move again. buy another home for cash have extra money in our pockets. everyone is happy. or you can choose to stay in the h9ome and mortgage payment will help pay for other stuff giving a boost to the economy

  8. Exactly everyone. we have already been lied to about the hamp and our paperwork was destroyed and had multiple denials. we were coerced into foreclosure by telling us we had to be 90 days late that was a lie. so no mention of helping those of us already fighting a foreclosure. That would have been smart. eliminate the foreclosures. just pretend the time we were coerced to stop paying and now did not happen and reduce the mortgage by 20%. Boom they can save millions of homes. this will not happen.

  9. And yes Wells Fargo also stole $80,000 in equity when they fraudclosed on my townhouse with 8 denials of modifications. Robo signed and post dated docs. Incorrect balances. And foreclosed as Servicer in place of Fannie Mae although neither originating or owned the mortgage. Note. Loan.

  10. If they finally are willing to principal reductions of 30% the modifications may actually work this time !!!

  11. I need to point out what the modification program has done since 2009 when HAMP was rolled out. Banks denied homeowners a HAMP which would have prevented court foreclosures and the homeowners would be current on their payments. The denials were the first step in a systematic process to push borrowers into “in-house” mods with fees and higher interest and foreclosure costs added to the balances. It also allowed banks to extort high interest for 40 years by threatening homeowner with foreclosure if they did not “agree”. Banks targeted this process at borrowers who had significant equity in their homes, and a HAMP modification would have prevented damage to the homeowner. But foreclosure represented a large profit for the banks. Getting a foreclosure sale meant stealing all the equity and collecting all the fees and high interest that got added by the bank. Any money not gained from a sale could be gained by FDIC insurance. It was a full proof plan for banks to profit from foreclosure and a road of potholes and barricades for any homeowner trying to get justice in court. Judges and homeowners alike were blindsided by the banks in their deceptive foreclosure tactics. Now the courts are wiser and are issuing laws and orders to get a handle on the foreclosure epidemic.
    The overall affect of all of this in my situation is this: there would be no foreclosure case in court had Wells Fargo complied with HAMP and I would have had an affordable payment back in April 2009. The banks wrongful denial put them in position to steal $73k of equity from my home. Their in-house mod that violated the terms of HAMP put the bankmin position to gain $30k in fees and interest which amount to $30k in damages the bank expected me to absorb along with my hardship.

    The three choices for the bank were to create no damages with a HAMP, create $73k damages in equity theft, or $30k damages in interest and fees by denying a HAMP.

    The banks have a huge conflict of interest in modifications. Causing damages to the homeowner is profit formthe banks.

    I know I’m preaching to the choir but it’s good to hear the voice of reason even if it’s an echo.

  12. The problem for my modification has been the extra interest and fees that were added to the principle amount while denying a HAMP for 7 years. In my case that’s $30k more than the HAMP MODIFICATION. I wonder how Freddie Mac will handle the fraud amounts that have been piled onto mortgages since 2009????

    Why is it every program seems to permit fraud and expects the homeowner to absorb the damages.

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