Flex Modification Program: A Guide

Flex Modification Program: A Guide
Written by Publishing Team

If you’re having a hard time making your monthly mortgage payments, a flexible modification program may be able to help you reduce your monthly payments, get a longer repayment period and possibly a lower interest rate. Here’s what you should know about Fannie Mae and Freddie Mac Flex mods and whether it’s the right move for you to apply.

What is Flex Editing Program?

The Flexible Modification Program (FMP) is a traditional loan modification program designed to help homeowners who are in long-term or permanent financial distress. It can be used as a way to avoid foreclosure.

If you qualify, you may be able to extend the loan term to 40 years and reduce your principal and interest payment by up to 20 percent. In some cases, the lender may also lower the interest rate on the loan.

FMP replaced Home Editing Program (HAMP), Standard Editing, and Simplified Editing in 2016, combining them all into one software for simplicity and flexibility.

Money management software is useful for both borrowers and lenders. The borrower can stay in their home, while the lender can save money by not going through the foreclosure process.

How does flex adjustment work?

If you are behind on your mortgage payments, you can apply for the Flex Modification Program through your lender. If you are 90 to 105 days overdue, Fannie Mae and Freddie Mac are required to review your status to determine if you qualify.

If you qualify, the lender may take one or more of the following:

  • Reduce your monthly payments by up to 20 percent
  • Add the amounts that are past due, including interest, to your base balance, so that they are not all due in advance
  • Extend your repayment period up to 40 years
  • Lower your interest rate
  • Carry a charge on a portion of your principal, which will not accrue interest and will be due when the loan is due or paid off early

The lender will review your case to determine what steps to take. Once you make that decision, you will enter a trial period, during which you will make payments as set by the program for a few months. If you complete that period, the lender will return your loan to the current status and the loan modification will become permanent.

Why should you consider a flex mod?

An FMP can be an excellent option for someone who is falling behind in mortgage payments due to financial hardship and not expecting a change in their situation. This long-term solution can help you avoid foreclosure, which can damage your credit and uproot your life, forcing you to find somewhere else to live.

Once you complete the trial period, the Flex adjustment also moves your loan to the current status, which won’t negate the fact that you’re in arrears, but it can stop further damage to your credit score.

If the arrangement matches your budget, you will be able to stay in your home with less financial stress.

Who qualifies for the flexi modification program?

Ultimately, your lender decides if you qualify for a flex modification. For starters, your loan must be owned or secured by Fannie Mae or Freddie Mac, which means it must be a conventional loan. If you have a government-backed loan such as an FHA, FHA, or USDA loan, these programs have separate loan modification options that you can pursue.

Some of the eligibility requirements for the program include:

  • The life of your mortgage is at least one year.
  • Your loan is a first mortgage, which means that your lender will be the first to be repaid if you default and the foreclosed home is sold.
  • If the loan is valid or is less than 60 days past due, it must be for your primary residence. If it’s a second home or investment property, you must be overdue for 60 days or more.
  • The lender has determined that your loan is in imminent default, which means the lender believes you can no longer afford your payments, even if the loan is valid or less than 60 days past due.

What is considered hardship for loan modification?

Under normal circumstances, lenders can accept any of the following forms of financial hardship:

  • The unemployment
  • Low income due to circumstances beyond your control
  • Increased housing expenses due to circumstances beyond your control
  • Natural or man-made disasters that affect your property or workplace
  • Long-term or permanent disability
  • Serious illness of the borrower, co-borrower, or dependent family member
  • Divorce or legal separation
  • Separation of borrowers who are not bound by marriage, civil union, or similar household partnership
  • The death of the borrower or the primary or secondary breadwinner
  • Labor transport for more than 50 miles
  • Other hardships as described by the borrower

The Federal Housing Finance Agency has extended these terms to homeowners who are experiencing perpetual financial hardship linked to the pandemic as well.

No matter what kind of financial hardship you’re dealing with, you’ll need to provide documentation during the application process to prove eligibility.

How to apply for a flex modification

If the lender has not already contacted you about a flex modification, contact them and ask that they send a response package to the borrower. You will need to complete and sign a Borrower Assistance Form and Form 4506-T or Form 4506T-EZ from the IRS, which allow the lender to request a copy of your tax return. You will also need to provide evidence of your income and financial hardship.

Send the package to your lender as soon as you complete it, and they will consider your application.

Note that if you are 90 days or more late, the lender uses a simplified process that does not require the package to be completed.

Other ways to get help with your mortgage payments

If it’s temporary financial hardship, a flexible adjustment program may not be right for you. Here are some alternatives to consider:

  • patience: Your lender may offer patience, which pauses your monthly payments for a period specified by the lender. This doesn’t erase what you owe, so you’ll need to get busy with those payments later.
  • Internal modification: Many mortgage lenders have created their own in-house modification programs that come with different terms than an FMP. Contact your lender to see if they offer a program that could be more suitable.
  • charitable organizations: Some charities offer housing assistance, although eligibility requirements and the extent of assistance can vary from organization to organization. Examples include The United Way, The Salvation Army, Catholic Charities USA, and the Society of Saint Vincent de Paul in Marin County.
  • Friends and family: Depending on your situation, you may be able to seek help from people in your circle of friends and family members. Just make sure you understand the potential impact of such a demand on your relationship, especially if you can’t repay it.

Whatever you do, take the time to research and compare all of your options to come up with the one that best suits your situation and needs.

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