Hi Cat, the loan is neither Fannie or Freddie. Furthermore I believe many of the mod programs look to get the monthly payment below 31% of gross income, could be wrong about that but I have read so much about mods, yet I think I am starting to confuse programs. In any case the 1st is currently IO with a super low rate due to the current market conditions. When Chase looked at it a couple years back they essentially said the current monthly is easily affordable... well duh, it is NOW because there is no principal repayment included, but its a ticking time bomb and will significantly increase once the IO period expires and rates begin to rise... to coin a phrase from a 1980's game show, double whammy!
The reason I asked is because the HAMP Tier 2 may apply to your situation. Look through that eligibility and see if it may be an option at this time.
Modification of Loan Secured by Rental Property:
A borrower seeking to modify the mortgage loan on his or her rental property must provide evidence of that income, which is generally documented on IRS Schedule E (Supplemental Income and Loss) of the borrower’s tax return for the most recent tax year. When Schedule E is not available to document rental income because the property was not previously rented, servicers may accept a current lease agreement and bank statements or evidence of damage deposits. All net income or loss from a rental property that is security for the loan being modified as well as income from any other rental property owned by the borrower must be documented and included in the calculation of the borrower’s gross income.
The monthly net income or loss on a rental property to be calculated for HAMP Tier 2 purposes should be 75 percent of the monthly gross rental income, reduced by the monthly principal and interest payment plus 1/12th of annual real property taxes, annual insurance premiums and annual homeowners’ associations dues, if applicable (PITIA). If 75 percent of the monthly gross income of a rental property securing the mortgage loan being evaluated for modification under HAMP Tier 2 is equal to or greater than the pre-modification PITIA of the rental property, the servicer must verify and document the cause of the borrower’s hardship as delinquency alone is not considered a hardship.
Monthly Mortgage Payment Ratio:
To qualify for HAMP, Tier 1, verified income documentation must confirm that the borrower’s monthly mortgage payment ratio prior to the modification is greater than 31 percent. For HAMP Tier 1, the monthly mortgage payment ratio is the ratio of the borrower’s current monthly mortgage payment to the monthly gross income of all borrowers on the mortgage note, whether or not those borrowers reside in the property.
If the borrower’s monthly mortgage payment ratio is less than 31 percent, the borrower is not eligible for HAMP Tier 1 and the servicer must consider the borrower for HAMP Tier 2.
In the case of HAMP Tier 2, the borrower’s post-modification monthly mortgage payment ratio (also called a debt-to-income ratio or DTI ratio) must be greater than or equal to 25 percent and less than or equal to 42 percent (Acceptable DTI Range). In HAMP Tier 2, the DTI ratio is the ratio of the borrower’s modified monthly mortgage payment to the monthly gross income of all borrowers on the mortgage note. If the borrower is seeking to modify a mortgage secured by a rental property, the DTI ratio is the ratio of the borrower’s total housing expense to the monthly gross income of all borrowers on the mortgage note including any net rental income from the rental property being modified.
If a borrower being considered for HAMP Tier 2 has a modified DTI ratio that is outside the Acceptable DTI Range, the borrower is not eligible for HAMP and the servicer must send the borrower a Non-Approval Notice, and consider the borrower for alternative loss mitigation options.