Loan Modification With Banks Not Participating In The MHA Act

Not all lenders are participating the the Making Homes Affordable Act (MHA) and therefore not following the Federal Guidelines. Take a breath, this does NOT mean that you cannot modify! Almost every lender regardless of size has internal modification programs. Many of them mirror the federal guidelines, some in fact, are even easier to qualify for. However, there are significant differences.

If your mortgage is owned by a small lender or a non-participating lender or servicer such as Green Tree, or a federal credit union, or a local bank chances are that your lender is not participating in the MHA. Under these circumstances, modification of your current loan is still possible; however, the requirements and the lenders negotiations are different.

We are seeing a trend where large lenders bound by the terms of the MHA are selling off large portions of the nonperforming and slow performing loans to servicers and investors that are not subject to the MHA and therefore are not required to modify loans under that program. IndyMac Bank has sold what seems like all of their second mortgages to Green Tree  for what we can only infer to be this reason, although it may have some basis in their merger with One West Bank.

Major Differences

1. Under the MHA, lenders who offer a loan modification must reduce your monthly mortgage payment to 31% of you gross monthly income. Lenders who are non-participatory are not subject to the same regulations.

2. MHA Modifications must be for the entire term of the mortgage, however these other lenders are not required to make long term modifications. Many of the non-participatory lenders offer only short term solutions that stay in effect until the borrower’s hardship has passed. If the hardship affecting the borrower has not passed by the time appointed in the modification agreement, these lenders will typically extend the terms of the modification until such time as the borrower is able to resume normal payments, refinances, sells, or otherwise disposes of the mortgage.

3. Large lenders are overwhelmed with modification requests and papers get lost, the loss mitigation division is so large that you deal with a new representative every time you call, and they are unable to properly train the entire staff. Small lenders however, have a smaller depatments, one person is assigned to your loan in particular, papers are direct to your negotiator, and the modification typically takes less time with fewer missteps and errors.

4. Smaller lenders and investors typically give their customer service repesentatives and loss mitigation specialists much broader power than the large lenders do. This allows small lenders to expidite the modification process and to tailor each modification, forebearance or work out plan to the individual borrower’s needs unlike to cookie cutter approach mandated by the MHA and adopted by the large lenders.

Although your mortgage may be held by a non-participatory lender, there is still a good chance that a borrower can get a modification and some relief from the overpowering monthly mortgage bill. It is not as easy to predict the benefit the lender will offer or the terms of the loan modification but these lenders understand that reduced payments far exceed no payments at all and are typically willing to help borrowers with hardships. The loan modification waters remain murky regardless of the lender who hold the mortgage and note.

Related Posts:

1. Do I Need To Hire An Attorney To Do A Loan Modification?

2. The Top Five Loan Modification Myths!

3. Streamlined Refinance As An Alternative To A Loan Modification

3 Responses to Loan Modification With Banks Not Participating In The MHA Act
  1. SANDRA
    September 13, 2010 | 5:36 pm

    I HAVE A LOAN WHICH THE LENDER IS NON PARTICIPATING IN THE MHA PROGRAM COUPLE WITH CHASE AS A SERVICER AND I AM GETTING NOWHERE FAST. LAST YEAR THEY CLAIMED I QUALIFIED AND PROVIDED ME WITH A PRELIMINARY MOD, TO WHICH I SUBSEQUENTLY FILED BK AND THEY SAID IS WAS DQ’D THEN THE NEW RULES WERE DISCLOSED WHICH DID NOT DQ ME …AND NOW THEY SAID NON PARTICIPANT…THEY ARE NOT DOING ANYTHING FOR ME.

    • Stefanie Devery
      September 16, 2010 | 1:38 pm

      There are times when if they are a non-participant, there is nothing you can do. You can ask if they are willing to do an “In-house” modification. Almost all of the banks and servicers have other loan modification programs besides MHA. If you would like to discuss this further, please feel free to contact our office.

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