Mortgage Modification Programs With Freddie Mac

••• Comstock Images/Comstock/Getty Images

If you're struggling to repay a loan Freddie Mac owns, guarantees or securitizes, a mortgage modification may help you to stay in your home. Although Freddie Mac doesn't work directly with consumers, it does make mortgage-relief programs available to lenders. When you apply for homeowner help, your lender evaluates your loan and your financial situation and works with you to find best solution to make your mortgage more affordable.

Making Home Affordable

Because Freddie Mac modifications are available only after a borrower has been disqualified for a Making Home Affordable modification, the first step toward modifying your loan is to apply though Making Home Affordable. You may qualify for this program if you're late on your payments or are current but in danger of falling behind because of a long-term financial hardship. Your current mortgage payment -- including interest, taxes, insurance and homeowner association dues -- must take at least 31 percent of your gross income. In addition, you must have taken out your loan on or before January 1, 2009 and the home must be your primary residence. If you qualify, you'll have a trial period. Make your payments on time during the trial to receive a permanent modification upon its completion.

Standard Modification

If you're turned down for a Making Home Affordable modification or you've defaulted during your trial, the next step is to apply for a Freddie Mac modification. Freddie Mac's standard modification is for first mortgages. You may qualify if you can document a long-term or permanent financial hardship, have had your loan for at least a year and haven't modified your mortgage more than once before. If the mortgaged home is your primary residence, you may be approved if your payments are current or fewer than 60 days overdue; for a secondary home or investment property, you must be at least 60 days past due. You may receive a permanent modification after completing a three-month trial.

Streamlined Modification

Freddie Mac's streamlined modification reduces the amount of documentation needed to evaluate your application, so you may be approved faster if you qualify. Your lender evaluates your loan for a streamlined modification if the payments on a qualifying loan for a primary, secondary or investment home are 90 days or more overdue. You'll receive a solicitation letter and trial plan notice showing your new payment. To accept it, just make the new payment and continue making timely payments through the end of the trial period. Freddie Mac may offer you a permanent modification if you successfully complete the trial. Loans that are more than 720 days overdue are disqualified from this program, as are borrowers who became 60 days overdue within a year of a prior modification or failed to meet the terms of a trial modification within a year after their evaluations.

Special Considerations

Freddie Mac standard and streamlined modifications require that you have a minimum amount of equity in your home. Your lender discusses this amount with you. In addition, both modifications must result in an affordable mortgage payment that's lower than your current payment -- in other words, you can't use a modification to simply refinance your loan. Although neither modification type has income limits, the standard modification has expense-to-income-ratio requirements and the streamlined modification allows a maximum credit score below 750.