My partner's corporation and my corporation are in a JV that owns a note in Ohio. The JV is in forbearance on that note. The JV has been receiving payments (through a well known servicing company) on time since April. If the July payment is timely, the JV is going to modify. The proposed modification is to reduce the interest rate from the current 9.125% to 6% and leave UPB untouched. The target exit is to have the borrower apply for an FHA 10-23 refi after four payments under modified terms.
First, having read the FHA letter, is the program still running? Specifically, has any BPer used this exit in the last couple of months? Assuming the program is still running, what pitfalls should the JV be looking for? Importantly, the 10-23 program requires that the borrower be current on the present mortgage. Does that mean that current payments in forbearance count? Or, does it mean that we must modify first and the borrower must remain current after the mod? Can I hold arrearages "over the borrower's head" after modification, stating that arrearages will be forgiven if four payments are made after modification, or must I forgive the arrearages at the point of modification? Finally, what have I NOT asked that I should have asked?
Thanks to all!!
"Current" means that the borrower is not behind on payments, i.e., no arrears. You would need to modify the loan to either forgive or capitalize the arrears in the mod and get a minimum of 3 payments from the borrower on the modified terms after any trial period the mod may define. I would recommend finding a mortgage broker who handles these for further guidance. The broker should be able to pre-qualify the borrower with regard to requirements such as minimum credit score and establish borrower income level. You would need to know income level in order to properly structure the modification so that it qualifies for the program.
Thank you @Mike Hartzog !
We've asked for paystubs for April, May and June. That will help us to structure the deal properly.
Any Mortgage Brokers out there who have 10-23 experience and are looking for work?
Bumping this thread to see if there are any Mortgage Brokers in north-east Ohio who have recently completed an FHA 2010-23 refi. I'd like to send some business your way.
I am looking for a mortgage broker that knows FHA 10-23.
I have seen newbie note investors talk about this program a couple times lately. The loan program expires at the end of this year.
I think many note investors seem to have wishful thinking about this program. We ran a couple hundred loans through this program. It is not a sub-prime loan program. Credit is a barrier. It is designed more for a high credit score delinquent borrower with negative equity not a defaulted borrower. A defaulted borrower not only doesn't qualify since the borrower in the program must be current on their loan but also a borrower who was in default will have to spend many months making payments and the Mortgagee and Servicer will need to report those payments to the credit agency. Often times high touch servicing doesn't report to the credit agency, creating a longer bridge to cross.
My fear is some of the newbie note investors are crossing the line with new origination and trying to push this type of program onto a borrower. A Mortgagee can not force a borrower to refinance. A Mortgagee can not force a specific vendor onto the borrower. Disclosure are required. I error on the side of you are doing it wrong already.
This loan program is viewed as an adjunct failure. Total loan volume in FHA is a mere couple thousand. Probably flirting around 5,000 or so total loans made over 5 years. Chances are, your borrower won't qualify. In addition, there won't be that many (hardly any at all) loan officers who have worked with this program.