FHA’s Loan Modification

HUD just released an updated mortgagee letter with regards to their modification program.  It is kind of confusing because HUD states if your interest rate is 50 basis points (.5%) or more above market rate then they will lower your interest rate to no more than 50 basis points above market rate.  Huh?  I know but the bottom line is that they want to lower your payment instead of modifying it and it increasing like so many other modifications that are out there.

If you have seen the statistics on the amount of loans modified and the percentage that are back in default, it was somewhere around 60%.  What they leave out or people tend to miss is that a large percentage of that 60% had payment INCREASES.  Yeah, not much of a modification. 

To read the full letter click on this link

http://www.hud.gov/utilities/intercept.cfm?/offices/adm/hudclips/letters/mortgagee/files/09-35ml.doc