Are you seeking a way to reduce your mortgage payments so you don’t lose your home to foreclosure?
If your mortgage servicer sold your loan to Freddie Mac, you might be eligible to apply for a Flex Modification. You can find out if your loan was sold to Freddie Mac using a self-service lookup tool (1).
If you are going for Flex Modification, be sure to do this at the earliest opportunity. The longer you leave it, the more expensive it will become in the long run. Borrowers who arrange loan modifications before they default will get more favorable terms than those who have already defaulted.
But, if you’re already in default or you’ve been sent a notice of the debt, you may still get a loan modification with reasonable terms.
What Is Freddie Mac?
Freddie Mac is a friendlier name for the Federal Home Loan Mortgage Corporation (FHLMC). This is a financial services company in the secondary mortgage market. That means they buy mortgages from lenders so that the lenders can lend to more people.
Freddie Mac was set up to create competition with Fannie Mae in 1970. Both Freddie Mac and its sibling Fannie Mae are currently in “government conservatorship,” which means they are owned by shareholders but controlled by the government. Both Freddie Mac and Fannie Mae were privately-owned companies until the financial crash in 2008.
However, the Trump administration is making plans to privatize both government-sponsored enterprises (GSEs) by 2022/2023 (2).
How Does It Work?
You take a mortgage from a bank or mortgage servicer. Your mortgage servicer can sell your loan to Freddie Mac in order to lend to more people. So, while your mortgage might be owned by Freddie Mac, you won’t deal with them in person. Instead, you deal with your mortgage servicer.
Freddie Mac then pools your mortgage with other mortgages and sells them to investors as mortgage-backed securities. This way, there is liquid cash flow circulating in the lending market which keeps the cost of mortgages down.
By keeping the flow of cash moving in the mortgage market, mortgage lenders are able to provide more flexible mortgage terms for their borrowers. The availability of funds in the mortgage market is why loan modifications are possible.
Freddie Mac Flex Loan Modification
Instead of losing your home to foreclosure, if your mortgage is owned by Freddie Mac you may be eligible for the Flex Modification program.
So, what is Flex Modification, exactly?
Flex Modification replaced the HAMP (Home Affordable Modification Program) when it was phased out in 2016.
With this program, you can make changes to your mortgage to reduce monthly payments on a mortgage debt by around 20% by adjusting the interest rate or the length of the repayment terms.
If you’re facing a foreclosure, a loan modification can get you current on your mortgage and keep you in your home.
Eligibility For A Freddie Mac Loan Modification
To be eligible for the Freddie Mac Flex Modification Loan, you must meet certain criteria.
Eligibility is a complex area and you really need to seek advice for your individual situation. There’s no substitute for speaking with an experienced foreclosure lawyer.
Here are a few basic eligibility criteria:
- Your Mortgage Was Purchased by Freddie Mac
- It Must Be a Conventional First Mortgage
- You Need a Regular Income
- The Loan Must be Over 1 Year Old
- Your Mortgage Was Purchased by Freddie Mac
- It’s likely your mortgage is owned either by Freddie Mac or Fannie Mae. Between them, they own around 66% of US mortgages [3]. Both companies have a look-up tool so you can find out if they own your mortgage [4].
- It Must Be a Conventional First Mortgage
- A first mortgage is a primary lien on a property. For example, a mortgage company lends you the money to buy your home. They own the primary loan and they will receive the proceeds if your house is sold after a foreclosure.
By contrast, a second mortgage is a mortgage that is guaranteed by your first mortgage. If you purchase a second property you can use your first mortgage as a guarantee.
- A conventional mortgage is not government-backed in any way. To get a conventional mortgage, you must have a good credit rating and a significant down payment. Another term for a conventional mortgage is a conforming mortgage since it satisfies the terms of Freddie Mac and Fannie Mae.
- You Need a Regular Income
- As when applying for any financial product, you’ll need to prove you have a reliable and regular income.
- The Loan Must Be Over 1 Year Old
- Loans less than 12 months old are ineligible for Flex Modification.
- What Can You Do If You Are Denied Flex Modification?
- If you feel you have been wrongly refused assistance with a loan modification to save your Long Island home, it’s undoubtedly worth seeking legal advice.
Some mortgage servicers will deny loan modification assistance if it is not in their interest to do so. Unscrupulous lenders do exist. If you don’t complete the Borrower Response Package correctly, a mortgage servicer could use this as a reason to deny help.
When applying for a Flex Modification for loans under 90 days of delinquency, you have to submit a file with information about your financial status. This report must include:
● Hardship details
● Income - taxed and untaxed
● Tax returns
The information provided in this report must be complete. Don’t give a mortgage servicer an excuse to refuse assistance.
It might be worth contacting a foreclosure lawyer in Long Island who has specialist knowledge of the loan modification process. A foreclosure lawyer will know precisely what information to include on your application.
If you use a foreclosure attorney to negotiate your loan modification, you have a greater chance of success than if you do it alone. Mortgage companies are much more likely to respond to your legal representative than they are to you.
If you’re facing a foreclosure, it’s vital that you take action immediately. Any time lost on rectifying your situation will cost you further down the line.
Contact Fine Law Offices today by calling (800) 939-3819 to arrange a FREE consultation with a foreclosure defense legal professional.
