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The Fannie Mae Loan Modification

For the struggling homeowner, a loan modification may be the only option available to maintain ownership of the home.  Other options are available to avoid foreclosure, but those usually require the homeowner to give up the deed to the home or require the home owner to pack their things and leave.

In order to be approved for a Fannie Mae loan modification, a loan must first be owned by Fannie Mae.  When a person is granted a loan by their lender, the loan is typically sold off to a group like Fannie Mae or Freddie Mac, making them the owner of the loan, and making the lender that the borrower applied to the servicer of the loan.  A borrower can determine who owns their loan by calling their lender and requesting the information.

Since Fannie Mae came under federal control, the requirements needed to apply for a Fannie Mae loan modification are the same as those needed to apply for assistance under President Obama’s Making Home Affordable Plan.  In general, the property on the home to be modified must be the primary residence of the borrower, the amount owed on the first mortgage must not exceed $729,750, the loan must have been issued before January 1, 2009, the monthly payment on the first mortgage (which includes taxes, interest, principal, and homeowner’s association dues) must be more than 31% of the borrower’s current gross income, and the borrower must have actual trouble paying their mortgage.

Applying for a loan modification is relatively simple; the borrower just needs to fill out an application for assistance from their lender, submit a few financial history documents, provide a hardship letter detailing their trouble and how they plan on recovering, and wait for their lender to respond to their request.  Unfortunately, the actual process is not as simple as it should be.  Since a person requesting a Fannie Mae loan modification will not actually deal with Fannie Mae at all (instead they will have to deal with their lender), the amount of attention and effort a borrower receives will vary from lender to lender.  In most cases, lenders have proven to be unhelpful, unknowledgeable, and generally rude to their borrowers.

No matter what type of loan modification assistance a person is pursuing, whether it be federal or private, an attorney should be hired to handle the process who can act on behalf of the borrower for the purposes of filing paperwork with the lender and the courts (if court intervention becomes necessary), negotiating on behalf of the borrower, and reviewing documents for accuracy and legality.  Perhaps the best service the attorney will be able to provide is keeping the lender honest and accountable.  Many borrowers who have attempted to pursue a loan modification on their own, without a lawyer on their side, often claim to be given the cold shoulder by their lender.  This type of behavior from the lender is not only unprofessional, it can also be responsible for a person’s house falling into foreclosure when borrowers are unable to get the answers they need.