All About Flex Modification in Mortgages
Years after the 2008/2009 Mortgage and Banking Crisis lenders and mortgage companies have new programs helping homeowners lower their rate and payments. New Non-Prime / Non-QM refinance and new Flex Modification programs may help many homeowners today.
Created in the later half of 2017, Flex mortgage modification serves as a successor to the Home Affordable Modification program. Through the Flex Modification program, homeowners who have trouble qualifying for a refinance have a potential way out in the form of a mortgage modification. Steve Kay from MeriQuest USA says “The program is exclusive to those with mortgages owned/insured by Fannie Mae and Freddie Mac although many different investors also may follow similar suit. There are other programs available as well such as FHA-HAMP and streamlined modifications”.
Loosely following the HAMP guidelines, the Flex modification program allows lenders to modify the terms of a mortgage loan to reduce the burden on borrowers at risk for foreclosure. Modifications vary based on each individual situation, but in many cases there are a few changes that make the most impact on the ultimate goal, which is to reduce the monthly payment amount.
How Flex Mortgage Modification Works
Like other mortgage modification programs on the market, Flex modification entails modifying an existing mortgage loan’s terms in an attempt to reduce the monthly payment. This of course is separate and apart from a refinance, which works by replacing a mortgage loan with an entirely new loan that has more favorable loan terms for the borrower.
What Adjustments Can Be Made Through Flex Modification?
Typical adjustments through the Flex program include one or more of the following:
Lowering the interest rate is a quick fix as far as mortgage modification goes. A lower interest rate results in instantly lowered monthly payments. It is much of the same for extending the loan term. Stretching payments out over a longer period of time (up to 40 years from the date of the modification) will also drastically reduce your monthly payments.
When lenders decide to add your overdue payments back into the principal amount, it fixes the delinquency issue, but not the issue of payment relief. Also, an increase in the principal amount without any of the other modification actions would only serve to increase the monthly payments.
What is Forbearance?
Forbearance is the action to be most cautious about. Forbearance is simply a deferment of mortgage payments. Many Lenders may issue 3 month, 6 month, 9 month or 12 month forbearance programs where they allow you to defer/skip the payments for a certain time period. This doesn’t mean the payments disappear for good, in fact at the end of forbearance you may have to pay back the deferred/skipped payments in a lump sum or the lender may agree to capitalize it into your previous loan or into a modified loan. Loan owners and loan insurers may be willing to negotiate forbearance options, because the losses generated by property foreclosure typically fall on them.
How to Get a Flex Mortgage Modification?
If you have a mortgage owned by Fannie Mae or Freddie Mac, and find it hard to make your monthly mortgage payments, then seeking a Flex modification could help you avoid the risk of foreclosure. Getting a mortgage modification could prove much easier than scrambling to refinance a mortgage after missing a payment.
But keep in mind that mortgage modification isn’t something to take lightly. It is reserved for borrowers who have faced or are currently facing financial hardships and are already at risk for potential foreclosure.
If you want to be considered for a modification, you have several options. You can call your lender direct, contact a local HUD approved counseling agency or hire a professional third party. If you’re going to choose to hire a third party, never ever pay any fees upfront as they can only charge you for modification if they get you an offer from the lender that you accept.
The realm of negotiating a mortgage modification is similar to that of a legal court case you may have. In the event you find yourself in a legal case, you have 1 of 4 options…
Option 4 in my opinion is the smartest way to go but to each their own. We recommend MeriQuest. They work with you with $0 upfront fees and work on a contingency where they are only due a fee for the modification if they get you an offer you accept. Steve Kay form MeriQuest USA says” Modifications are free, they come from the lender and their investors, you’re not hiring and paying someone for the modification itself but the work that goes into getting you approved for the modification. There is just so much red tape and most people don’t have the time or resources to properly and strategically plan for negotiating a loan modification. You really want someone on your side to advocate and help you get the banks bottom line offer, and it doesn’t always happen for everyone. Sometimes no matter what anyone says or does might not get you a modification. It’s at the lenders discretion to give you one, however if present correctly, a lender may be convinced a modification is a win win for them as well. Lenders want to avoid defaults, law suits and foreclosures from happening.”
Why You Should Hire a Loan Expert
You should consider hiring an expert to represent you in a loan modification for several reasons, including the following:
Disclosures Companies Must Make in Communications with Prospective Loan Modification Customers
Non-Prime / Non-QM Refinance Programs
Borrowers who’ve been rejected for a conventional or government loan shouldn’t give up hope. They might qualify for a non-QM loan, but as with any lender, they need to shop around to compare rates, products and fees.