01 Dec 08 Qualifying a Loan Modification & Calculating an Affordable Mortgage Payment
In order to calculate an affordable mortgage payment, recent financial income information must be available for the borrower. Efforts to contact the homeowner using direct mailings, calling campaigns, email, and other outreach methods are in play. The FDIC Loan Modification Program calculates the modified principal, interest, taxes, and insurance (PITI) payment per a borrower specific HTI ratio of no more than 38%.
Housing expenses on a Principal Interest Taxes Insurance (PITI) basis may include:
- The modified principal and interest payment for the subject mortgage, as applicable,
- Real estate taxes,
- Property hazard, flood, and mortgage insurance premiums,
- Leasehold estate payments, and
- Homeowners’ association (HOA) dues.
Industry standards set forth by certain FHA mortgage lending programs (Hope for Homeowners)indicate a mortgage payment based on a 31% to 38% HTI ratio is affordable. The FDIC Loan Modification Program follows these mortgage origination standards as illustrated below:
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Example of HTI ratio calculation Monthly Gross Income ___ $3,618 – Borrower 1 $2,756 – Borrower 2 $6,374 – Total Monthly Gross Income
If the initial loan modification calculation at 38% does not decrease the borrower’s payment by 10 or more, the HTI ratio is lowered to 35% and then lowered to 31% to achieve the 10% savings. In cases where a 10% savings cannot be realized, the 31 % HTI ratio is used for affordability purposes. |
PITI Payment Determination $6,374 x 38% = $2,422 Monthly Housing Expense ______________________ $2,422 – Maximum Total Monthly Housing Expense $ – 364 – Taxes, hazard, flood, and mortgage insurance, etc. $ – 85 – HOA dues $1,973 – Maximum modified principal and interest payment Total HTI Ratio_______ |
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Thank you for explaining the breakdown of the FDIC loan modification program. I am sure there are distressed homeowners out there that are looking into these various options. I enjoyed this post and look forward to reading more in the future. -Thanks Marc