Borrowers who can’t afford their mortgage payment may want to take a look at the Home Affordable Modification program, which is part of the Obama administration’s Making Home Affordable plan.

The Home Affordable Modification program creates a uniform process for loan servicers to modify existing mortgages for homeowners who meet the following two conditions:

  • They spend more than 31 percent of their income on monthly housing costs.
  • They already are delinquent or in imminent danger of default because of a major change in their financial situation.

The rules are complicated. The federal government has issued top-level guidelines, but Fannie Mae and Freddie Mac have their own specific guidelines. In addition, lenders, loan servicers and mortgage insurers may have their own requirements as well.

The program was introduced primarily for mortgages owned or secured by Fannie Mae and Freddie Mac; however, other mortgages may also qualify if the loan servicer chooses to offer this program.

Borrowers are advised to call their loan servicer to discuss their situation. Many of these servicers are overwhelmed with customer inquiries, so you’ll need to be patient and persistent.

While you’re on hold, read our summary of the guidelines from the government and Fannie and Freddie.

Borrower requirements

  • The borrower must have missed a mortgage payment or be at risk of imminent default because of a significant increase in the payment or other household expenses, a significant reduction in income, or another type of hardship that makes the payment unaffordable.
  • Borrowers whose mortgage is in foreclosure are eligible, according to Fannie Mae and Freddie Mac guidelines. Foreclosure will be stayed on loans owned or secured by Fannie Mae or Freddie Mac during the loan modification process, subject to state law.
  • Borrowers who are in bankruptcy may be eligible.
  • Borrowers must document their income and expenses and provide evidence of hardship or a major adverse change in their financial situation.
  • Fannie Mae and Freddie Mac require a credit report, but no minimum or maximum credit score.
  • The borrower must sign a loan modification agreement, hardship letter and other documents.
  • Misrepresentation of the borrower’s qualifications is a federal crime.

Property requirements

  • The property must be a detached home, duplex, triplex or four-unit residential property. Fannie Mae and Freddie Mac guidelines allow condominiums, cooperatives and manufactured housing units.
  • The owner must occupy the property. Fannie Mae and Freddie Mac require documented evidence of owner occupancy.
  • Second/vacation homes, rental properties and vacant homes are not eligible.
  • The property is subject to a value test to determine if the loan modification makes sense for the investor. A borrower who has a lot of equity in his or her home or whose income is very low relative to the home’s value may not pass this test.

Existing mortgage

  • The borrower’s monthly mortgage payment, property taxes, homeowners insurance and homeowner association dues must be more than 31 percent of the borrower’s monthly income before income tax.
  • The unpaid loan balance must be equal to or less than $729,720 if the property is a detached house or condominium. Freddie Mac has published the following higher limits for multiple-unit properties: two units, $934,200; three units, $1,129,259; and four units, $1,403,400.
  • The loan must have originated before Jan. 1, 2009.

Modified mortgage

  • The borrower’s housing costs will be reduced to 31 percent of his or her income in four steps:

    — The interest rate could be cut as low as 2 percent.

    — The loan term could be extended to as long as 40 years.

    — A portion of the loan balance could be deferred.

    — The loan balance could be reduced, unless the loan is owned or secured by Fannie Mae or Freddie Mac.

  • If a portion of the loan balance is deferred, no interest will be charged on that amount. A balloon payment will be due when the borrower pays off or refinances the loan or sells the home.
  • Unpaid interest, property taxes, insurance premiums and other costs paid by the lender on the borrower’s behalf may be added to the loan balance, subject to state law.
  • Unpaid late fees must be waived.
  • The borrower must complete a trial period of three or four months before the loan modification becomes permanent.
  • The interest rate on the borrower’s new loan will be fixed for five years. After that, the rate can increase up to 1 percent annually, subject to a cap of the market interest rate on the day the loan was modified.
  • Negative amortization is prohibited.
  • If the borrower has a second loan, the lender may modify or eliminate that loan as part of the first-loan modification process through the Making Home Affordable Second Lien Program.
  • An escrow account for property taxes and insurance is required, subject to state law.
  • Borrowers will not be charges any fees or costs for the loan modification.
  • Borrowers may be offered the Hope for Homeowners program as an alternative. This program reduces the borrower’s loan balance so he or she will be able to refinance with a new loan guaranteed by the Federal Housing Administration, or FHA.
  • Borrowers who make payments after loan modification will receive “success incentives” paid by the U.S. Treasury. These incentives accrue monthly and are paid annually. The payments will be applied to the loan balance and could total as much as $5,000 over a five-year period.

Take our quiz to see if you qualify for mortgage modification.

How to apply

Borrowers should contact their loan servicer to find out whether they qualify for a loan modification. A list of loan servicers that have signed formal agreements with the federal government to offer the Home Affordable Modification program is found at the Making Home Affordable Web site.

  • Borrowers should have their loan or Social Security number handy and are encouraged to gather other documents before they call the loan servicer. Required documents may include:

    — Paycheck stubs or other income-related documents.

    — Bank account statements.

    — Most recent income tax return.

    — Information about the borrower’s assets.

    — Information about any second loan secured by the property.

    — Account balances and monthly minimum payments on credit cards, student loans, car loans and other debts.

    — Property tax statement.

    — Proof of homeowner’s insurance.

    — A letter that describes why the mortgage payment is unaffordable.

  • Borrowers are encouraged to consult a nonprofit housing counselor certified by the U.S. Department of Housing and Urban Development. Counseling may be required for borrowers who have a lot of debt relative to their income. This service is free.
  • Borrowers are encouraged to complete the short self-assessment questionnaire at to obtain a preliminary indication of whether they may be eligible.
  • The Home Affordable Modification program will end Dec. 31, 2012, unless that deadline is extended.
  • More information may be found on the federal government’s Making Home Affordable Web site, Fannie Mae’s Web site and Freddie Mac’s Web site.

Loan servicer contact information

Loan servicers’ Web sites vary widely in terms of how much information they offer about the Home Affordable Modification program.

Some Web sites contain a summary of the basic program requirements, links to relevant government Web sites, telephone and fax numbers, and instructions on how to submit a financial hardship request. Other Web sites don’t mention the Making Home Affordable program or offer only limited contact information.

The following is a list of servicers that have signed formal agreements with the government to offer the Making Home Affordable program. Most of the contact information listed below also may be found on the servicers’ Web sites. Some servicers have been overwhelmed with inquiries, so borrowers may experience a long wait before their call is answered by a live person.

Bank of America

Phone: (800) 846-2222

Carrington Mortgage Services (CMS)

Phone: (800) 561-4567

Fax: (877) 267-1331


Chase/Washington Mutual (WaMu)/EMC

Phone: (866) 550-5705

Fax: (866) 221-1019 (Chase)

Fax: (904) 886-1328 or (904) 886-1329 (WaMu)

Fax: (917) 849-2677 (EMC)


Phone: (866) 915-9417


Countrywide Home Loans (owned by Bank of America)

Phone: (800) 669-6607

Fax: (805) 520-5019

GMAC Mortgage

Phone: (866) 899-5308

Green Tree Servicing

Phone: (800) 643-0202

Fax: (866) 870-9919

Home Loan Services/First Franklin Loan Services

Phone: (800) 622-5035

Fax: (412) 499-3400

Ocwen Financial Corp.

Phone: (800) 746-2936

Fax: (407) 737-6174


Saxon Mortgage Services

Phone: (888) 325-3502

Select Portfolio Servicing

Phone: (888) 818-6032

Wells Fargo

Phone: (800) 678-7986

Wilshire Credit Corp.

Phone: (888) 502-0100

For more information on mortgage modification, see Bankrate’s mortgage modification topic page.

Promoted Stories