Does it matter if you have a FHA or conventional loan when attempting to getting a loan modification? Apparently so.
Well, we were once again denied for a loan modification on our primary residence. The bank says we are being denied for the third time. I say for the second. Not sure where the third time is coming from. Maybe they counted all the times we had to resubmit our paperwork, which in that case I would say we were up to the the fifth or sixth time if that were the case. Even though we were approved for a loan modification on our investment property, we did not achieve the same success with the house we live in. How is that possible? We submitted the very same paperwork as requested on both loans. Here are the reasons we were given as to why we were declined:
"Loan has been reviewed for standard HUD modification, partial claim and SFB and does NOT qualify due to negative financials. Reviewed for FHA-HAMP program. Homeowner does not qualify for FHA-HAMP, due to the current front end ratio being below the 31% requirement."
So what was the difference? We were told by the negotiator, if I can even call her that, that our rental was with Fannie Mae and that certain guidelines, such as debt ratios, are not taken into consideration like they are on our primary residence, which is with Freddie Mac. We were also told that since we have an FHA loan on our primary residence they are held to different guidelines than they were on our investment, which is a conventional.
Should it really matter whether we or anyone else has a FHA or a conventional loan? I don't think so. The same "guidelines" should apply for whatever type of loan you have or regardless of who the investor is. I really feel most people don't realize that what type of loan they have or who their loan is with will make a difference on whether they get approved for a loan modification or not.
People should also be aware that you won't get as generous a deal on a FHA loan as with a conventional. Our loan modification for our rental property now has a 2% interest rate and if we had been approved on our primary, the best we would have received was a 4% interest rate. There is something seriously wrong when all loan modifications are NOT created equal. One the most frustrating things is there really isn't any information about this anywhere. Not that I can find anyway. This really needs to get out to the press and people need to be made aware. We need this to change.
This is not over yet. We will be calling the president of the mortgage division tomorrow and get this done. If not, maybe going to the press is what needs to happen. If we don't get a loan mod so be it, but people need to be made aware that all loan mod's are not created equal.
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