How Flex Mortgage Modification Works

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:
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• Lowering the Interest Rate
• Adding missed payments to the remaining principle
• Extending the loan term
• Forbearance

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…
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1. Represent yourself in a court of law – would you really do this all alone? With your mortgage same thing, would you really want to go into battling with the lender for their best offer all alone with no knowledge of the banking system, rules and regulations? 
2. Hire a Public defender - this is similar to hiring a HUD counselor – they are free and will help you through the process and they have helped tons of people, but remember, whether they win your case or not, get you good results or not, someone is still funding their salary and office to run.
3. Hire an Attorney who works on a upfront Retainer Fee for his time – this isn’t a bad idea, but once they have their retainer fee, do they really care about the outcome of your case? They are already paid, and their payment is based on their time and not specifically winning or the results…you find loan modification attorneys and law firms who operate like this. I wouldn’t personally go with this option..in fact it may even be against the law to pay anyone upfront before you receive an offer.
4. Hire a Contingency Attorney who is only awarded a fee if/when he wins your case – they are some professionals for hire who operate like this where they only are due a fee if they perform and get you an offer you accept. They have all the incentive in the world to get the job done, work on getting you the best results so you get an offer you want to accept.

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:
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• Your lender usually has an attorney representing its interests, so you should have your own representative defending your interests.
• You may have only one shot at submitting your loan modification application correctly. Having an experienced expert prepare your application is like having a headhunter craft your resume.
• A loan modification expert knows the system and how to work it for your benefit.
• An expert can quickly prescreen you, so if you probably aren’t eligible for a loan modification, you won’t end up wasting time, energy, and money trying to get one.
• An expert can take all the hassles off your plate, freeing up your time and energy to get a better handle on your finances.
• An expert is free from the emotional baggage that can undermine negotiations. Being emotionally involved, you’re more likely to engage in arguments and make poor decisions.
• A seasoned pro knows immediately whether the offer a lender pitches is fair and square.
• You’ll probably more than recoup the cost of hiring an expert from the amount of money he or she saves you by getting a better deal than you could on your own.

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​Lenders often try to dissuade distressed borrowers from hiring their own representation. After all, lenders often claim, “We’ll modify your mortgage for free.” Sure, they’ll modify it, but are they going to modify it to true affordability?

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Disclosures Companies Must Make in Communications with Prospective Loan Modification Customers

1. "You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender [or servicer]. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us [insert amount or method for calculating the amount] for our services."
2. "[Name company] is not associated with the government, and our service is not approved by the government or your lender;" and
3. "Even if you accept this offer and use our service, your lender may not agree to change your loan."
4. It is not necessary to pay a third party to arrange for a loan modification or other form of forbearance from your mortgage lender or servicer. You may call your lender directly to ask for a change in your loan terms. Nonprofit housing counseling agencies also offer these and other forms of borrower assistance free of charge. A list of nonprofit housing counseling agencies approved by the United States Department of Housing and Urban Development (HUD) is available from your local HUD office or by visiting www.hud.gov.

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.

• Many borrowers who could not qualify for a mortgage before due to the strict lending guidelines on government and conventional loan programs can now qualify
• The mortgage industry went through a total overhaul after the 2008 Mortgage and Credit Meltdown
• Alternative loan programs such as Non-QM Loans have been launched in recent years

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