What Is the Flex Modification Program?
Many mortgages are backed by one of two government-sponsored enterprises known as the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation (FHLMC)—commonly referred to as “Fannie Mae” and “Freddie Mac,” respectively. These organizations purchase and guarantee loans made by qualified lenders that meet certain standards. “Borrowers with Fannie Mae- or Freddie Mac-owned loans can benefit from the Flex Modification Program,” said Jennifer Harder, founder and CEO of Jennifer Harder Mortgage Brokers, in an email to The Balance. This program replaces the now-expired Home Affordable Modification Program (HAMP), as well as the “Standard” and “Streamlined” modification programs previously offered by Fannie and Freddie. With a loan modification, a lender makes changes to the term of your loan so that payments are more affordable and you avoid foreclosure. Harder said the Flex Modification Program is designed to lower an eligible borrower’s monthly mortgage payment by approximately 20%. This is done by first capitalizing delinquent or outstanding payments (tacking them onto the current balance), reducing the interest rate, then extending the repayment period to 40 years from the modification date. “You must successfully complete a trial period plan before the servicer can finalize the adjustment,” Harder said. The trial lasts three months and shows your loan servicer that you’re capable of handling the payments. “If you make all of the trial payments, you’ll get a permanent loan modification,” she said. This will likely waive any past late fees, penalties, or other fees as well. However, if you miss a payment during the trial period, you’ll no longer be eligible for modification and could default.
Flex Modification Eligibility
“Anyone having problems paying their mortgage can apply to this program as long as they meet the requirements,” said Paul Sundin, a CPA, tax strategist, and CEO of Emparion, in an email to The Balance. The most basic requirement is that Fannie Mae or Freddie Mac should own the loan. Additionally, the loan must be a conventional first mortgage, and the borrower must have borrowed it at least one year before applying for the modification. “The applicant should also have a stable source of income and proof of the ability to pay monthly,” Sundin said. There may be other requirements as well, which vary from lender to lender, he added. If all the requirements are met, the borrower goes through a trial modification period. If everything goes according to plan, the monthly mortgage payments are permanently changed when the final capitalized amounts are known.
Types of Flex Modification Programs
Aside from the traditional Flex Modification, there are variations of this program designed for homeowners experiencing different types of hardship. The table below breaks down these differences in eligibility, using the “Streamlined” evaluation process. Note that when a borrower is 90 to 105 days behind on payments, servicers automatically send them a trial plan offer based on their existing information on file. Even if you don’t accept the initial offer, the lender can continue to offer you a trial plan until shortly before foreclosure.
