The Federal Housing Finance Agency (FHFA) has made it easier for struggling borrowers to complete an application for mortgage help all by themselves: no outside -- and expensive -- assistance necessary.
The FHFA, in conjunction with Fannie Mae and Freddie Mac, two of the secondary mortgage market entities it supervises, has implemented a new Mortgage Assistance Application, or MAAp, to implement some lessons learned during the housing crisis. One of the most important lessons is “ensuring that the application process is straightforward and as easy to navigate as possible,” the FHFA said in a press release.
The new MAAp form gives equal weight to five principles -- accessibility, affordability, accountability, sustainability and transparency -- and is designed to coincide with the new Flex Modification program implemented last fall by Fannie and Freddie. (Flex Mod itself replaced the Home Affordable Modification Program.) Under Flex Mod, borrowers seeking help can get their payments reduced by as much as 20 percent. They can also have any past-due amount added to their unpaid balance and have their payments recalculated over a new loan term.
Of course, the first rule for financially strapped homeowners is to call your servicer: the company that collects your payments. Even if you’re not yet late with a payment, but think you might miss one soon, call to find out if you are eligible for help under their proprietary programs.
If they can’t or won’t help, the next step is to complete the new MAAp. The earlier you apply, the greater the payment relief you may receive, according to Fannie Mae.
The new, simpler form incorporates feedback from borrowers and the mortgage business, and is more user-friendly than its predecessors. For example, it allows borrowers to determine how they will be contacted, and terms have been revised and clarified. And for the first time, it includes information on housing counseling services, resources for borrowers with limited proficiency in English, and a list of steps that will follow.
It also reduces the amount of support documentation required to show the applicant’s hardship and income. The requirement that borrowers must submit IRS form 4506-T to document their earnings is removed, except in limited circumstances. Applicants must now submit either their two most recent pay stubs or bank statements.
Prior to being 90 days delinquent, a borrower experiencing financial challenges can fill out the MAAp and submit it to their servicer. The servicer will then evaluate the borrower for foreclosure alternatives and explore the options, which can include a repayment plan, forbearance, modification, short-sale or deed-in-lieu of foreclosure.
Unfortunately, there will always be those who try to scam homeowners desperately searching for help to avoid foreclosure. Federal authorities continue to come down hard on these outfits. Just last month, thanks to the Federal Trade Commission, a federal court halted an illegal scheme in which consumers were charged $3,900 in unlawful advance fees and $650 in monthly installments in exchange for the promise of “legal assistance.”
This case, one of many in recent years, contains a couple lessons for consumers:
1. The government will never contact you on this issue by mail, phone, text or email unless you contact an agency yourself. And when Uncle Sam does get back to you, all correspondence will have a case number.
2. Beware of any offers that require you to pay upfront for help. Under the FTC’s Mortgage Assistance Relief Services Rule, it is illegal for a company to collect any fees until you have actually received, and accepted, an offer of relief from your lender. You don’t have to pay until the company gets you the results you want.
Among other things, the FTC went after the entities named below for using doctored government logos, claiming special relationships with particular lenders, and unlawfully telling consumers not to pay their mortgages or communicate with their lenders.
As noted above, you can and should talk to your servicer, the sooner the better. You don’t need an intermediary. Never, ever stop paying whatever you can on your mortgage, and never stop communicating with your lender. Doing so can make the problem worse by getting you further behind on payments, damaging your credit and even causing you to fall into foreclosure.
In many instances, the FTC alleged, consumers paid hundreds or thousands of dollars only to learn that the defendants had not obtained the promised loan modifications, and in some cases, had never even contacted any lenders. Many people incurred substantial interest charges and other penalties for paying the defendants instead of their mortgage payments, and some lost their homes to foreclosure.
Some groups falsely claimed a 98-100 percent success rate, and that they could cut people’s mortgage rates in half. Nobody, but nobody, has a success rate that high, and nobody’s rate will be cut in half. If you encounter anyone who says that, head for the door.
Again, the FTC has shut down many types of mortgage modification scams, but it hasn’t stopped them all -- so homeowner beware.
The latest to come under the agency’s sword include: Preferred Law PLLC; Consumer Defense LLC in Nevada; Consumer Defense LLC in Utah; Consumer Link Inc.; American Home Loan Counselors; American Home Loans LLC; Consumer Defense Group LLC, formerly known as Modification Review Board LLC; Brown Legal Inc.; AM Property Management LLC; FMG Partners LLC; Zinly LLC; Jonathan P. Hanley; Benjamin R. Horton; and Sandra X. Hanley.