Making Home Affordable Loan Modification Program Examples

The following are examples of ways the Home Affordable Modification Plan can help make your mortgage affordable. These are examples and are not intended to indicate the exact results you can expect if you qualify for this plan.

Legend

GMI = Gross Monthly Income

PITIA = Principal, Interest, Taxes, Insurance and Association Fees

DTI = Debt to Income Ratio

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Example 1: Rate reduction to achieve 31% DTI

GMI                                                                                    $ 4000.00

31% GMI (Target Monthly Payment)                                      $ 1240.00

Loan $200,000 @ 7.5% 30 years                                          $ 1398.43/month

Taxes and Insurance                                                            $ 250.00/month

PITIA                                                                                  $ 1698.43/month

Modify rate to 4% to achieve a DTI of approximately 31%

Modified Rate to 4%:                                                           $ 954.83/month

Taxes and Insurance:                                                          $ 250.00/month

New Payment                                                                  $ 1204.83/month

Savings                                                                             $ 493.60/month

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Example 2: Rate reduction and extending term of loan to 35 years to achieve 31% DTI

GMI                                                                                     $ 3000.00

31% GMI (Target Monthly Payment)                                       $ 930.00

Loan $200,000 @ 7.5% 30 years                                            $ 1398.43/month

Taxes and Insurance                                                             $ 250.00/month

PITIA                                                                                   $ 1698.43/month

Modify rate to 2%. Modify term to 35 years to achieve a DTI of approx 31%

Modified Rate to 4%:                                                            $ 662.53/month

Taxes and Insurance:                                                           $ 250.00/month

New Payment                                                                    $ 912.53/month

Savings                                                                              $ 785.90/month

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Example 3: Rate reduction, term extension & principal forbearance to achieve 31% DTI

GMI                                                                                   $ 4500.00

31% GMI (Target Monthly Payment)                                    $ 1395.00

Loan $450,000 @ 9.0% 30 years                                          $ 3620.80/month

Taxes and Insurance                                                            $ 250.00/month

PITIA                                                                                  $ 3870.80/month

Modify rate to 2%. Modify term to 40 years

Modified Rate to 2% for 40 years:                                          $ 1362.72/month

Taxes and Insurance:                                                           $ 250.00/month

New Payment                                                                    $1612.72/month

Because lowering the rate to the maximum floor of 2% and extending the terms of the loan to 40 years still does not achieve the desired DTI of 31%, the lender, at its discretion can elect to forgive or forebear a portion of the principal to achieve the 31% DTI. In this example the lender elects to forbear $75,000 of the principal which would be due as a balloon payment at the end of the term of the loan or if the home were to be sold. This is not expected to be a common practice and would most likely be used in an instance where the borrowers suffered a loss of income and the home suffered a sharp decrease in value.

Modified Rate to 2% for 40 years calculated on $370,000          $ 1135.60/month

Taxes and Insurance:                                                              $ 250.00/month

New Payment                                                                      $ 1385.60/month

Savings                                                                                  $ 2485.10/month

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