Flex Modification

A mortgage loan modification is available to borrowers who are experiencing a permanent or long-term hardship and can no longer afford to make regular monthly mortgage payments. The Fannie Mae Flex Modification offers eligible homeowners mortgage payment relief. The terms of the modification are determined by applying a series of steps that are designed to achieve a 20% or More principal and interest payment reduction target.

Effective Date and Review Timing

• Review is based on a complete Borrower Response Package (BRP) received prior to 90 days delinquency.
• The program distinguishes between short-term and long-term hardships.
• Flex Modifications apply to long-term hardships only.

Types of Flex Modifications

Streamlined Flex Modification

• No borrower documentation required.
• Servicer reviews eligibility after 90 days delinquency.
• Streamlined offers are sent directly to eligible borrowers.
• Proactive solicitation is permitted unless a foreclosure sale date is scheduled.

Eligibility Trigger

• Borrower becomes 90 days delinquent, or
• Borrower with a Step-Rate Mortgage becomes 60 days delinquent within 12 months following the first payment due after an interest rate adjustment.

Target Modified Payment

• Target 20 percent reduction in Principal and Interest (P&I).
• Maximum 40 percent Housing Expense-to-Income (HTI) ratio.
• PITIA must not exceed 40 percent of gross monthly income.
• PITIA excludes Mortgage Insurance Premiums and subordinate mortgages.

Property and Delinquency Criteria

• Conventional first-lien mortgage loans.
• Loan must be: 60 to 90 days delinquent, or
  • Current or less than 60 days delinquent but meets imminent default criteria.
• Second homes or investment properties must be 60 to 90 days delinquent.
• Property may be vacant or condemned

Modified Principal and Interest Criteria

• If borrower was current or less than 31 days delinquent at evaluation, the modified payment must be less than the pre-modified payment.
• If borrower was 31 or more days delinquent at evaluation, the modified payment must be less than or equal to the pre-modified payment.

Trial Period Plan (TPP)

• Modified loan retains first-lien priority.
• Timely first TPP payment indicates acceptance of the offer.
• All TPP payments must be made by the last day of the month in which they are due.
• TPP may be extended up to an additional nine months for bankruptcy approval.

Required Borrower Documentation (If Applicable)

• Completed and signed Form 710, Uniform Borrower Assistance Form, or its equivalent.
• Income documentation as outlined in Form 710.
• Hardship documentation based on hardship type.
• IRS Form 4506-T or 4506-T EZ, only if requested by the servicer.

Important Update

Mandatory collection of IRS Form 4506-T or 4506-T EZ was eliminated effective February 2019 under Modification Bulletin 2019-1.

Loan Modification Agreement

• Borrower must execute and return the Flex Loan Modification Agreement.
• The agreement is executed and dated based on the mortgage investor entity.

Modification Exception Criteria

• Unusual hardship.
• Three or more prior modifications.
• Failed Trial Period Plan within the last 12 months.
• Became delinquent on a prior modification within 12 months (no exceptions).
• Non-conventional loans, including FHA, VA, or RH loans.
• Loans subject to recourse agreements.

Principal Forbearance Guidelines

• Principal forbearance is permitted only when the post-capitalization LTV exceeds 100 percent.
• Three or more prior modifications.
• Forbearance amount is the lesser of:
  • The amount required to achieve a 100 percent post-modification LTV, or
  • 30 percent of the gross post-modification unpaid principal balance.