Problem Three

Eligible Hardships Neglected

Problem

Eligible hardships are either misunderstood or being ignored by lenders. Many lenders still using the “4 D’s”: 1)Divorce, 2)Disability,

3)Death and 4)Distant Relocation as the only hardships.

Comparison of Eligible Hardships for GSE (Fannie Mae and Freddie Mac) and non-GSE (FHA, VA, USDA, Conventional portfolio)

Listed for GSE only. Not on non-GSE list.
Hardships listed for GSE (Fannie Mae and Freddie Mac) loans on Form 710 Uniform Borrower Assistance Form
Hardships listed for non-GSE (FHA, VA, USDA, Conventional portfolio) loans on Treasury Hardship Affidavit and Request for Mortgage Assistance (RMA)
1) Unemployment
2) Reduction in Income
3) Increase in Housing Expenses
4) Divorce or legal separation
5) Death of a borrower
6) Disability: Long term or permanent
*7) Disaster (natural or manmade)
*8) Distant employment transfer/Reloc.
*9) Business Failure
10) Other: hardship not covered above
1) household income has been reduced. For example: reduced pay or hours, decline in business earnings, death, disability or divorce of a borrower or co-borrower.
2) expenses have increased. For example: monthly mortgage payment reset, high medical or health care costs, uninsured losses, increased utilities or property taxes.
3) unemployed and (a) I am receiving/will receive unemployment benefits or (b) my unemployment benefits ended less than 6 months ago.
4) monthly debt payments are excessive and I am overextended with my creditors. Debt includes credit cards, home equity or other debt.
5) cash reserves, including all liquid assets, are insufficient to maintain my current mortgage payment and cover basic living expenses at the same time.
6) Other

Solution

  • Require that lenders put in writing that they accept/don’t accept ten (10)  Form 710 Uniform Borrower Assistance Form hardship reasons for Government Sponsored Enterprise (GSE) loans and six (6) hardship reasons for  Making Home Affordable (MHA) loans. If lenders do not abide by common hardship reasons and have their own criteria, this needs to be known by the homeowner, real estate professionals and others who are working to get the short sale through.
  • Often when homeowners are current on their mortgage and apply for a short sale, the short sale denial comes back with the reason blank. Require that lenders specify a reason.
  • For GSE loans and lenders participating with MHA, publicly known hardships should be given priority. More communication about exact hardships should be provided to all GSE’s and MHA participants.
Continue to Problem 4