Loan Modifications – What are the Standard FDIC Guidelines?
In the past year, in this uncertain and troubled economy, over 600,000 people have lost their job and many others are finding it hard to keep their jobs. Companies that offer mortgages are collapsing and the incidences of bankruptcy are increasing due to foreclosures.According to the FDIC, there are two main guiding principal’s for loan modifications:* Figure out how much a borrower can afford by multiplying the gross monthly income by the Housing to Income (HIT) ratio, subtract taxes and insurance and reduce this amount by at least ten percent.* The modification must be less than the cost of foreclosure according to the Net Present Value (NPV)The FDIC Affordability Payment CalculatorIn the FDIC loan modification program, the Principal, Interest, Taxes and Insurance (PITI) cannot be more than 38% higher than the HITPITI includes:* The modified principal and the interest payment* Any real estate taxes* Any property taxes* The leasehold estate payment* Any HOA duesLet’s do an example to see how this works in real life. If you have two people, maybe a married couple, on the same loan, both incomes are used in the calculations. ‘Chris’ earns $3,298 and ‘Pat’ makes $2,288. This means that the couple earns $5,586 altogether.The PIHI of $5,586 at 38% would be $2,123. From this $401 would be for taxes and insurance and $50 for the HOA dues so the maximum modified payment would be $1,672. Therefore a family that earns just over $67,000 before taxes each year would have a monthly mortgage payment of only $1,672 according to the FDIC guidelines.The FDIC sets guidelines that let mortgage companies know how to modify loans according to income and family circumstances in proportion with housing debt. Many people who own homes don’t just owe on their mortgage, they owe to other creditors as well. In these cases, lending organizations work with credit counselors and other non-profit agencies to help borrowers get their finances in order so they can keep up with their modified loan. The FDIC guidelines for loan modifications will help homeowners keep their homes, but in order to survive this recession, people have to learn to manage their debt.
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