Frequently Asked Questions
the REST Report
What is the REST Report?
The REST Report is a 11-page Report that’s generated using specific information about you, your property and your mortgage. It runs proprietary algorithms and NPV analytics to determine whether it is in the best financial interest of your investor to modify your loan.
How can I use my REST Report?
How can I use my REST Report?Homeowners can send a copy of their REST Report to their lenders or servicers, along with the required supporting documentation, when they apply for a loan modification.
What do I do if my lender denies my HAMP modification, though my Report shows I’m qualified?
The first thing you should do if your lender refuses to grant your loan modification when your Report shows that you are qualified for HAMP is contact your lender and make sure the data input numbers they’re using in their analysis match up with the numbers you submitted and are shown in your Report. You should also make sure the bank hasn’t scheduled a sale date in the near future.
Mistakes happen often, and if there’s a discrepancy that can be corrected, your lender will re-run the numbers and you should qualify.
If the numbers the lender is using do match up with the numbers shown in your REST Report, ask the lender to explain to you where its analysis differs from the one shown in your Report. If the person you’re speaking to won’t tell you why you’ve failed to qualify, speak with their supervisor. Ask that person to explain why the bank is saying you’re not qualified, and tell him or her that you plan to escalate the matter as far up the chain as necessary, including reporting the lender or servicer to Freddie Mac if necessary.
There have been cases where banks have simply refused to adhere to the rules set forth by the HAMP guidelines for servicers which were published by the U.S. Treasury.
If your bank refuses to grant your loan modification even though your REST Report shows you as qualified, and it refuses to consider you for any in-house modification program, you may want to bring your concerns directly to the government at You should consult an attorney. You may also wish to complain to Freddie Mac, which is responsible for monitoring HAMP compliance. Email: BorrowerOutreach@freddiemac.com or go to: https://www.hmpadmin.com/portal/resources/escalation.html
You may also wish to consult an attorney to assist you in the negotiations with your bank.
Make sure that you or your attorney checks with your bank to see if a sale date has been set, and if so, make sure you or he or she notifies the bank that there is a dispute and that you are therefore still in the process of applying for a HAMP loan modification. Banks are not permitted to foreclose while a homeowner is being considered for HAMP.
What if my REST Report shows I don’t qualify for HAMP?
If you are not qualified for a HAMP loan modification, the REST Report tells you why you’re not qualified.
It then determines whether some in-house modification may be in the financial best interest of the investor who owns the loan, and proposes some alternative terms helpful when applying for an in-house modification program. In-house loan modification programs are offered by most, but not all HAMP participating lenders and servicers, and more in-house modifications have been granted than HAMP modifications.
Your REST Report can be invaluable when applying for a lender’s in-house program because your Report will also show the Net Present Value (“NPV”) to your lender, of several alternative loan workout options. You may choose to hire a lawyer or other third party to help you obtain such an in-house loan modification.
Does the REST Report guarantee that I will be approved for a HAMP loan modification by my lender or servicer?
No. No one can guarantee that a bank will agree to modify a loan, or do anything else for that matter.
But… submitting a REST Report showing you that you qualify for HAMP, along with your supporting documents, when applying for a loan modification improves your chances of being approved under HAMP, because the REST platform is a version of the same type of software platform used my major banks and servicers to determine HAMP eligibility.
And, when you have a REST Report, you have something that can help you push back, should your bank still refuse to modify your loan. Without it, it’s worth pointing out, you are essentially unarmed.
I’ve already applied for a HAMP loan modification and am still waiting to hear whether I’ve been approved for a permanent modification. Should I still consider ordering the REST Report & how will it help me?
Homeowners already in a trial modification, but still waiting to hear if they have been approved for a permanent modification under HAMP, benefit from running their REST Report because with their Report, they have a much better idea of where they stand before hearing whether or not they have been declined for some undisclosed reason.
Once a bank denies you for a loan modification, it can move to sell your house quickly, and sometimes that means a matter of days. But knowing that you don’t qualify earlier in the process allows you to talk with your bank about alternatives to the HAMP program for which you may be eligibleas well as make sure your family is not forced to leave their home quickly because it has been sold on just a few days’ notice.
Should no modification program be available to you for whatever reason, the REST platform may also qualify you for short sale. The government’s latest short sale incentive program for lenders and servicers is known by the acronym “HAFA”.
What is the “NPV Test,” as related to HAMP loan modifications?
As stated in the HAMP Guidelines:
A standard NPV Test will be required on each loan that is in Imminent Default or is at least 60 days delinquent under the MBA delinquency calculation. This NPV Test will compare the net present value (“NPV”) of cash flows expected from a modification to the net present value of cash flows expected in the absence of modification. If the NPV of the modification scenario is greater, the NPV result is deemed positive.
If the NPV Test generates a positive result when applying the Standard Waterfall, the servicer is required to offer a Home Affordable Modification to the borrower.
If the NPV Test generates a negative result, modification is optional, unless prohibited under contract.
The U.S. Treasury Department’s most recent HAMP NPV Model (V 3.1) is currently only available to participating HAMP servicers. For this reason the model used by the REST Report, has certain variations. Although the REST Report is a proprietary model, based on version 3.0 and the input provided by the borrower, the loan modification terms proposed in the REST Report should fall within the allowable tolerances of the HAMP eligibility guidelines.
How do I know my bank will pay attention to the REST Report, as far as my being qualified for HAMP is concerned?
When you apply for a loan modification without the REST Report, assuming you meet the basic eligibility requirements and pass the Standard Waterfall test, lenders and servicers enter the information you’ve provided into a spreadsheet or a software platform in order to run the NPV test, which is what establishes whether the borrower is eligible for HAMP. If the NPV test is positive, the lender is supposed to offer the homeowner a loan modification.
When you submit your REST Report, your lender will do the same thing it always does analyze your situation for eligibility under HAMP. If the NPV is positive, and you meet all the other requirements, the lender should grant a HAMP modification.
How do I use the REST Report in a mediation proceeding with my lender?
Some states now offer mediation programs to homeowners who are in default or at risk of foreclosure. The job of the mediator is to bring the parties together to explore options in an attempt to avoid foreclosure if possible.
The problem is that without the homeowner bringing to the negotiating table what is contained in the REST Report, mediators have little to, well… mediate. In simple terms, if all the homeowner has to help make his or her case are paycheck stubs and a tax return, the mediator is really dependant on the lender’s representations about what alternative strategies to foreclosure are available..
Because the REST Report shows the Net Present Value to your lender of various alternatives, it gives the mediator a lot more to discuss or the basis to challenge what the lender is or isn’t offering.
Are the modified payment terms of the HAMP modification shown in my Report accurate?
Yes they are. The modified payment terms that are shown in your REST Report are at least very close to the terms that will be offered by a permanent HAMP modification. Sometimes they are literally pennies away.
What are the eligibility requirements for the HAMP program?
For a comprehensive presentation and discussion of the HAMP eligibility requirements, please click here.
Does everyone applying for a HAMP loan modification have to enter a “trial modification phase,” before being approved for a permanent modification?
Yes. There’s simply no way around it: if you apply for a HAMP loan modification, you’ll enter the trial modification phase for at least three months before finding out for sure whether you qualify for HAMP’s permanent loan modification.
Do I have to hire a lawyer or other third party to help me get my loan modified?
No, you do not have to hire anyone to help you get your loan modified.
Of course, that being said… it’s really up to you. Not everyone has the time, is as comfortable or is equally equipped to negotiate with a major financial institution
over their mortgage when they are at risk of losing a home.
Is it true that the government is now requiring banks to grant principal reductions as part of the HAMP loan modification program?
The government recently announced that lenders and servicers that participate in HAMP will now be “encouraged” to consider principal reductions, but it is too early to know how effective that encouragement will be. Principal reductions, while not unheard of, remain rare, with the government reporting that they make up approximately 10% of all HAMP modifications.
I recently heard that HAMP will now be offering some new assistance for unemployed borrowers. Is that true?
Yes, the government has recently announced that unemployed applicants to the HAMP loan modification program will be offered some additional help in the way of forbearances of payments for 90 day periods, in the hopes that they will find work in the time provided, but again, it is too early to know how this change to HAMP guidelines will manifest itself.
What is included in my monthly gross income?
A borrower’s Monthly Gross Income (MGI) is the amount before any payroll deductions and includes wages and salaries, overtime pay, commissions, fees, tips, bonuses, housing allowances, other compensation for personal services, Social Security payments, including Social Security received by adults on behalf of minors or by minors intended for their own support, annuities, insurance policies, retirement funds, pensions, disability or death benefits, unemployment benefits, rental income and any other income.
Will I need to verify my income before being granted a trial or permanent loan modification?
Yes. If you qualify for HAMP, the lender/servicer will verify your income in a number of ways.
The borrower’s income will be verified by requiring a signed Form 4506-T (Request for Transcript of Tax Return) and obtaining the most recent tax return on file for each borrower on the note. For wage earners, the two most recent pay stubs for each wage earner on the note will also be required.
For self-employed borrowers or for non-wage income borrowers, the borrower’s income will be verified by obtaining other third-party documents that provide reasonably reliable evidence of income. Borrowers must also represent and warrant that they do not have sufficient liquid assets to make their monthly mortgage payments.
What if I don’t want to accept the modified payment terms offered to me by the HAMP loan modification?
You are not required to accept modified payment terms offered by any lender/servicer. There is no question that, with some real estate values still declining, depending on the terms of the existing mortgage, and the homeowner’s income, some borrowers have declined to accept the terms of a proposed loan modification, preferring instead to move towards a short sale or even a deed-in-lieu of foreclosure.
And that’s one of the key advantages to running the REST Report… you’ll know what the modified payment terms will look like for various modification alternatives. You may not always like the answer, but we think you’ll agree that knowing is always better than not knowing.
My credit score has gone down significantly in the last couple of years. Does that mean I won’t get approved for a loan modification under HAMP?
No. Although the NPV formula does require your credit score, a low score by itself does not make you ineligible for HAMP.
What if I’ve filed bankruptcy or am in the process of filing bankruptcy? How does bankruptcy affect my obtaining for a HAMP loan modification?
If you are in default on your loan and thinking about filing a bankruptcy, be sure to consult an attorney about whether it is better to go forward with one or other first. Normally lenders will not consider a modification while a bankruptcy proceeding is pending, but that does not mean you are disqualified from getting a modification after you are discharged from bankruptcy. The problem is that while a bankruptcy is pending, the bank may continue foreclosure proceedings. You must take expert advice before taking, or not taking, any course of action.
My home is seriously “under water”. Can I still qualify for a HAMP loan modification?
Yes. Owing more than your home’s current appraised value, referred to as being “underwater,” does not disqualify you for a HAMP loan modification.
What are the alternatives to foreclosure that homeowners should know about?
If you don’t qualify for a HAMP loan modification, here are some of the foreclosure options that may be available to you:
A loan workout can include a forbearance, loan modification, short sale, short pay-off, deed in lieu of foreclosure, or any other material change in the terms of the contract whereby the lender accepts less than it expected under the terms of the original contract as full satisfaction of the obligations of the borrower.
We DO NOT recommend waiting until you’ve missed payments to begin working with your lender. The earlier you take action, the better the chances are that you’ll be able to negotiate a successful loan resolution. That said… some lenders have simply refused to negotiate with borrowers until their loans are delinquent by one or two months.
If your lender tells you that they will not talk with you about a loan modification until you have missed payments, be sure to document who at your lender has told you that, and on what date the conversation occurred.
A) Loan Modification
The term “loan modification” means a modification of the note such that the monthly payment is modified. A lower monthly payment can result from lowering or deferring the principal, lowering the interest rate, extending the term of the loan, or forgiving late fees or penalties. In most cases the interest rate and corresponding payment will go down for a period of five to 40 years.
If you have a large arrearage (a term referring to missed payments and late fees), however, your monthly payment may actually go up under the terms of a loan modification. This is because, despite a lower interest rate, your principal has gone up by the amount of your arrearage. If the arrearage is extreme, is may cause a sizable payment jump if re-amortized over the remaining life of the loan.
A loan modification should not be confused with a forbearance plan. In a forbearance plan, the lender agrees to “forebear” or delay the immediate collection of principal, interest and penalty fees, but does not reduce them. The lender may allow the borrower to reduce or suspend payments for a short period of time after which another option must be agreed upon in order to bring the loan current.
Generally, in a forbearance plan, the lender does not waive delinquent payments and fees, but rather simply adds them to the existing loan balance.
Sometimes the lender will offer to allow the borrower to make a higher monthly payment until he or she “catches up”. This type of offer is rarely helpful to the homeowner, but may be the only option for a second chance should no other option be made available.
C) Short Pay-Off
A short pay-off occurs when the lender accepts less than the full amount owed as payment on the loan.
This occurs most often when the second mortgage is essentially unsecured due to a drop in the value of the home that secures the second loan. In such a case, it is important that the homeowner address the tax implications, since paying less than the face amount of the note is considered “debt relief”, which in some instances may be treated as income for tax purposes.
In addition, a short payoff may have serious negative consequences to the borrower’s credit rating. You should consult an attorney for answers to these questions.
D) Short Sale
A short sale occurs when the lender permits the borrower to sell the property for less than the balance of the mortgage owed. The offer to buy is presented to the lender, and the lender must then agree to accept the purchase price as payment for the loan.
It is important that the lender waive any right to a deficiency judgment (i.e. the right to collect the difference between the purchase price and the amount owed). The laws addressing these issues vary from state to state, so you should consult an attorney before proceeding with a short sale.
Make sure your lawyer makes you aware of any tax implications and deficiency actions that may result from a short sale.
E) Deed in Lieu
“Deed in Lieu” refers to the lender’s acceptance of the deed to the subject property “in lieu of” (instead of) foreclosing on that property. The lender is given the opportunity to take the property as payment in full for the loan.
A lender may consider this option, because it’s less expensive and time consuming than pursuing a foreclosure and eviction.
As with short pay-off and short sales, this arrangement may have tax and other legal consequences. The laws addressing these issues vary from state to state, and be sure that your lawyer makes you aware of any tax implications and deficiency actions that may result.
Reminder: The deed-in-lieu option is only available when there are no additional liens on the property.
What is HAMP?
HAMP stands for: Home Affordable Modification Program, a component of the government’s Making Home Affordable initiative, which is a part of the Economic Affordability & Stability Act of 2008.
Homeowners who may qualify for a HAMP loan modification are required to enter a “trial modification period,” during which they must make all monthly trial payments on time and as agreed.
HAMP guidelines state that the trial period is 3 months, however, it is not at all uncommon for trial periods to last much longer. Some borrowers have reported having to make trial payment for close to a year before learning whether or not they qualify for a permanent HAMP loan modification, or modification under a lender’s or servicer’s in-house program.
If you qualify for a HAMP loan modification, the federal government compensates participating lender
’s and mortgage servicers as an inducement for modifying the terms of your loan.
Who is eligible to get a HAMP loan modification?
HAMP applies to all mortgages originated before January 1, 2009. No loans originated after that date are eligible. New borrowers will be accepted until December 31, 2012. Program payments will be made for up to five years after the date of entry into the HAMP.
The goal of a HAMP loan modification is to modify the loan so that the full housing cost [principal, interest, taxes, insurance, homeowners insurance and hazard and flood insurance] [referred to as PITIA] does not exceed 31% of the borrower’s monthly gross income.
Mortgage insurance premiums (PMI Insurance) are excluded from the PITIA calculation.
The standard analysis (called the “Standard Waterfall”) states that to reach the 31% goal, the lender must first reduce the loan’s interest rate, and then extend the term of the loan. But there are limits: the interest rate cannot be lowered below 2%. And the loan term cannot be extended beyond 480 months.
How Does HAMP Work?
First, the lender takes the borrower’s monthly gross income, and multiplies by 31%. This results in a target amount (“TA”), which is the amount to be made available for all monthly mortgage related expenses.
Next the lender subtracts monthly property taxes, insurance and homeowner’s association or condominium dues. The result is the target monthly mortgage payment.
The next step is to identify a qualifying rate, term and payment using the Standard Waterfall approach.
First the lender capitalizes any accrued arrearages; interest or escrow advances, and adds those amounts to the loan balance to obtain a new starting loan balance.
Next the lender is required to reduce the current interest rate in .125 increments to reach the target 31% monthly mortgage payment. The interest rate may not be reduced to less than 2%.
If the interest rate reduction does not result in a 31% monthly mortgage payment, the loan’s term may be extended up to 480 months (40 years).
If neither an interest rate reduction nor term extension meets the Target Amount, the borrower does not qualify for a HAMP modification.
Preliminary Qualification Terms:
- The borrower’s total monthly housing cost (PITIA) must exceed 31% of his or her gross monthly income.
- The home must be owner-occupied, single family 1-4 unit property (including condominium, cooperative, and manufactured home affixed to a foundation and treated as real property under current State law).
- The home must be the primary residence (verified by tax return, credit report, and other documentation such as utility bills).
- The home may not be investor-owned.
- The home may not be vacant or condemned.
- Borrowers in a current bankruptcy case are not automatically eliminated from consideration for HAMP.
- Borrowers in active litigation regarding the mortgage loan can qualify for a modification without waiving any legal rights.
- First lien loans must have an unpaid principal balance (prior to capitalization of the arrears) equal to less than:
1 Unit $729,750
2 Units -$934,200
3 Units $1,129,250
4 Units 1,403,400
Are there Modification Fees?
NO Modification fees or charges are to be charged to the borrower. The investor may not require the borrower to contribute cash for eligibility or execution of a Trial or Permanent modification.
What happens to unpaid late fees?
When the HAMP modification is completed, normally the unpaid late fees will be waived for the borrower. These include late fees prior to the start of the Trial Period and accrued during the Trial Period.
Is a HAMP modified loan assumable?
No. Even if assumable before the modification, the HAMP modification cancels this feature.
What happens if I don’t qualify for a HAMP loan modification?
Just because you don’t qualify for HAMP, it doesn’t mean you can’t get your loan modified. You should ask your lender or servicer if you can be considered for a standard or in-house modification program. If such a program is not available, the government is providing compensation servicers in order to facilitate short sales or deeds-in-lieu in those cases in which borrowers either fail the net present value (NPV) test (described above) or fail to qualify for, or default under, the modification program.
What Happens If I Re-default?
A loan will be considered to have re-defaulted when the borrower reaches a 90-day delinquency status.
Re-defaulting Loans will be terminated from the program, and no further payments of any kind will be made to the lenders, investors, servicers, or borrower. Re-defaulting Loans should be considered for other loss mitigation programs prior to being referred to foreclosure.
Do Fair Lending laws apply to HAMP?
Yes. Loan modifications under HAMP must comply with the Equal Credit Opportunity Act and the Fair Housing Act, which prohibit discrimination in connection with mortgage transactions.
Loan modification programs are subject to the fair lending laws, and servicers and lenders should ensure that they do not treat a borrower less favorably than other borrowers on grounds such as race, religion, national origin, sex, marital or familial status, age, handicap, or receipt of public assistance income in connection with any loan modification.
Does My State Offer a Mediation Program Prior to Foreclosure?
Some States require a mediated session between the borrower and the bank prior to foreclosure.
Providing the State Appointed Mediator with the REST Report, even if it does not show you qualify for HAMP, will give the mediator more to go on, when suggesting alternatives to foreclosure, as the Report provides other work out options that may make sense and be available to you.
Mediation in some form or other takes three forms:
Mandated by State Legislature:
- New York
- New Hampshire
- State Court mandated
- New Jersey
Mandated Locally by Court/Local Governing Body:
- Rhode Island
Lenders are not currently required to reduce a borrower’s principal loan balance under HAMP, and as a practical matter, to-date most servicers have chosen not to reduce principal balances in conjunction with HAMP loan modifications.
However, HAMP guidelines do state that servicers may forgive principal to achieve the 31% target payment. Principal forgiveness can be used on a standalone basis or before any step in the Standard Waterfall.
However, if principal forgiveness is used, subsequent steps in the Standard Waterfall may not be skipped. If principal is forgiven and the rate is not reduced, the rate will be frozen at its existing level and treated as a modified rate for the purposes of the program’s Interest Rate Cap (see below).
Interest Rate Cap (“IRC”)
The modified interest rate must remain in place for 5 years, after which time the interest rate will increase by 1% per year, or such lesser amount as may be needed, until it reaches the IRC.
The IRC for a modified loan is the lesser of the fully indexed and fully amortizing original contract rate, OR the Freddie Mac Primary Mortgage Market Survey rate for 30-year fixed rate conforming mortgage loans, rounded to the nearest 0.125%, as of the date that the modification document is prepared.
If the modified rate exceeds the Freddie Mac Primary Mortgage Market Survey rate in effect on the date the modification document is prepared, the modified rate will be the new note rate for the remaining loan term.
Lenders are not currently required to forebear principal under the HAMP guidelines. However, should a lender agree to forebear principal, no interest will accrue on the amount of the forbearance, and the servicer shall forbear on collection the deferred portion of the Capitalized Balance until the earlier of the maturity of the modified loan, the sale of the property, or the pay-off or refinancing of the loan.
A Net Present Value Test (“NPV”) is REQUIRED for each loan submitted for a HAMP loan modification, and the REST Report will show you whether you have passed the NPV test.
The NPV Test compares the Net Present Value of the cash flows expected from a modification to the net present value of cash flows expected in the absence of a modification.
If the NPV of the modified scenario is greater, the NPV result is deemed positive. In other words, the government will not require lenders to modify loans if doing so will cause the owner of the loan to be financially worse off than were the loan not to be modified.
The NPV Test applies to the outstanding loan balance and does not presume any principal forgiveness. However, the servicer may choose to forgive principal if the servicer determines that principal forgiveness improves the likelihood of loan performance and the value of the modification.
If the NPV Test generates a positive result, the servicer is required to offer a HAMP modification to the borrower. If the NPV Test generates a negative result, modification is optional, unless prohibited by the servicer contracts, known as Pooling & Servicing Agreements (PSAs).
The monthly payment reduction incentive is available for any HAMP loan modification, whether or not the NPV of the modification is positive, that meets the eligibility requirements and is performed according to HAMP’s standard “waterfall” testing.
If the NPV Test result is negative and a HAMP loan modification is not pursued, the lender/investor must seek other foreclosure prevention alternatives, including alternative modification programs, deed-in-lieu and short sale programs.
The Deminimis Test
The modified mortgage payment proposed must be at least 6% less than the borrower’s existing monthly mortgage payment.
Lenders and servicers require a verifiable hardship before you can be eligible for a loan modification. Acceptable hardships include: job loss, reduction in pay, medical issues, death of family member, divorce, or interest rate reset. The important point is that you must be able to demonstrate to the lender how your hardship has impacted your ability to make your loan payments.