HOMEOWNERS who are having trouble making their monthly mortgage payments may be able to get some relief by modifying the terms of their loans.The federal government’s Homeowner Affordability and Stability Plan is aimed at owners whose mortgages are backed by Fannie Mae and Freddie Mac, while other individual lenders are offering help as well.
But borrowers may have a difficult time determining if they qualify for these programs, in large part because loan-modification guidelines are not always widely available, and busy lenders often have little time to explain them to customers.
FICO, formerly known as the Fair Isaac Corporation, which developed the most widely used scores for assessing credit risk, unveiled a Web site this month – MortgageReliefOnline.com – to help these homeowners.
The new site walks borrowers through a questionnaire about their income, mortgage debt and home value, and asks for contact information.
FICO takes that information and pairs it with data regularly received from the credit bureaus about the borrower’s credit and spending history, among other things. The company’s technology then helps determine whether the borrower qualifies for a loan modification. If so, an owner can get further assistance, free of charge, through Money Management International, a nonprofit credit-counseling organization based in Houston.
The system recognizes 30 major lenders and loan servicers, but FICO’s technology will also try to determine whether other lenders who are not on that list offer loan modification programs.
At the end of the questionnaire, MortgageReliefOnline offers an early indication of whether a borrower is eligible to have the loan terms modified. (To qualify, monthly housing payments typically need to exceed 31 percent of gross monthly income, among other things.)
Those who qualify for the new federal program can see their mortgage rates drop to 2 percent, while others can obtain loans at the best market rates even if they have less than 20 percent equity in their homes.
Candidates for a loan modification will see an on-screen message telling them to stand by for a phone call, within 48 hours, from a housing counselor.
Borrowers will probably be advised to gather various financial documents, including mortgage payments, car loans and credit card debts as well as pay stubs. If the counselor believes the borrower is a candidate, he or she will forward the file to the lender, along with a recommended course of action.
Mark Greene, the chief executive of FICO, says lenders and loan servicers are more likely to respond quickly to such recommendations than to borrowers who contact them directly. “The servicers know that qualified leads are coming through, with all the information attached,” he said.
FICO receives a portion of the fees that Fannie Mae and Freddie Mac give to lenders and servicers who successfully modify a loan, according to Mr. Greene.
Chuck Stanley, Money Management International’s senior vice president for client education and counseling, said that when his organization’s counselors had contacted mortgage companies in the past about loan modifications, they had typically received a response within 24 hours.
That is not to say consumers should expect to get new loans so quickly. Mr. Stanley says it typically takes about 30 days to modify a loan “if the client is responsive” to requests for information from the lender or loan servicer. It can take longer for those without the proper documentation.
Howard Glaser, a principal of the Glaser Group, a mortgage consulting firm in Washington, said borrowers who still get their bills from their lenders – and not from loan servicers – will typically have an easier time because all their loan documentation is in one place.
Mr. Glaser called the new FICO Web site “a positive step,” though he added, “just how positive it is will depend on whether the loan servicers will cooperate with the process.”
Some people who keep a watchful eye on their credit scores may wonder whether filling out the Web site’s questionnaire might signal financial distress to the credit bureaus, which in turn could lower their scores.
Not to worry, says Craig Watts, a FICO spokesman. The borrower’s information goes only to the lender and the credit counselor.
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