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Fannie Mae Unveils Alternative Modification to HAMP

March 25, 2010

Fannie Mae instructed companies that service loans it guarantees to allow modifications to borrowers who made payments during a trial period but did not meet all income document requirements under the initial terms.

On March 18, Fannie Mae issued Lender Letter 2010-04 instructing servicers how to resolve active trial modifications under the Home Affordable Modification Program (HAMP) at the conclusion of the temporary review period on January 31, 2010.

Fannie Mae's Alternative Modification (ALT Mod) is offered as an alternative to the HAMP modification for those borrowers who were eligible for and accepted into a HAMP trial period plan but were subsequently not offered a HAMP permanent modification because of eligibility restrictions.

Servicers must consider an Alt Mod for a borrower who was in an active HAMP trial period plan initiated before March 1, 2010 and meets the other eligibility requirements. In addition to the requirements that the borrower's loan was evaluated and considered eligible for HAMP and that the HAMP trial period was initiated before March 1, 2010, the following conditions must be satisfied:

  • The loan must be secured by a one- to four-family unit owner-occupied property;
  • The borrower must have made all required payments in accordance with the HAMP trial period plan, including any subsequent payments that were due when the servicer attempted to convert the trial plan to a permanent modification;
  • Any subsequent trial period payment(s) due from the borrower must be submitted before executing a permanent modification agreement; and
  • One of the following conditions must be satisfied:
  • The monthly mortgage payment ratio based on verified income was less than 31 percent;
  • The target monthly mortgage payment ratio of 31 percent based on verified income could not be reached using the standard HAMP modification waterfall; or
  • The borrower failed to provide all income documentation required for a HAMP modification but meets the streamlined income documentation requirements for the Alt Mod.
Alt Mod is a temporary program. Cases must be submitted through the HomeSaver Solutions Network (HSSN) on or before Aug. 31.

Escrow Accounts Servicers are reminded that when a mortgage loan being considered for a HAMP modification is a non-escrowed mortgage loan, the servicer must assume full responsibility for administering the borrower's escrow deposit account in accordance with the mortgage documents and all applicable laws and regulations and establish an escrow deposit account in accordance with the Servicing Guide, Part III, Section 103: Escrow Deposit Accounts and Announcement 09-05R. All of the borrower's trial period payments under HAMP as well as the payments due under the Alt Mod must include a monthly escrow amount unless prohibited by applicable law. Recording the Modification

For all mortgage loans that are modified pursuant to an Alt Mod, the servicer must ensure that the modified mortgage loan retains its first lien position and is fully enforceable. The modification agreement must be executed by the borrower(s) and, in the following circumstances, must be in recordable form:
  • if state or local law requires a modification agreement be recorded to be enforceable;
  • if the property is located in the state of New York or Cuyahoga County, Ohio;
  • if the amount capitalized is greater than $50,000 (aggregate capitalized amount of all modifications of the mortgage loan completed under Fannie Mae's mortgage modification alternatives);
  • if the final interest rate on the modified mortgage loan is greater than the pre-modified interest rate in effect on the mortgage loan;
  • if the remaining term on the mortgage loan is less than or equal to 10 years and the servicer is extending the term of the mortgage loan more than ten years beyond the original maturity date; or
  • if the servicer's practice for modifying mortgage loans in the servicer's portfolio is to create modification agreements in recordable form.
In addition, to retain the first lien position, servicers must:
  • Ensure all real estate taxes and assessments that could become a first lien are current especially those for manufactured homes taxed as personal property, personal property taxes, condominium/HOA fees, utility assessments (such as water bills), ground rent and other assessments.
  • Obtain a title endorsement or similar title insurance product issued by a title insurance company if
    • the amount capitalized is greater than $50,000 (aggregate capitalized amount of all modifications of the mortgage loan completed under Fannie Mae's mortgage modification alternatives), or
    • the final interest rate on the modified mortgage loan is greater than the pre-modified interest rate in effect on the mortgage loan.


  • Record the executed modification agreement if
    • state or local law requires the modification agreement be recorded to be enforceable;
    • the property is located in Cuyahoga County, Ohio;
    • the amount capitalized is greater than $50,000 (aggregate capitalized amount of all modifications of the mortgage loan completed under our modification alternatives);
    • the remaining term on the mortgage loan is less than or equal to ten years and the servicer is extending the term of the mortgage loan more than ten years beyond the original maturity date; or
    • the final interest rate on the modified mortgage loan is greater than the pre-modified interest rate in effect on the mortgage loan.




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