Flex Mortgage Modification Program Guide

Find out how to afford your mortgage payments and avoid foreclosure

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Your mortgage is likely one of your biggest financial responsibilities. If you find yourself in a financial tight spot and can’t afford the payments, you may feel scared and helpless. Fortunately, it’s possible to work with your lender to get a loan modification to get back on track and avoid losing your home. A major one is known as the Flex Modification Program.

What Is the Flex Modification Program?

Many mortgages are backed by one of two government-sponsored enterprises known as the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation (FHLMC)—commonly referred to as "Fannie Mae" and "Freddie Mac," respectively. These organizations purchase and guarantee loans made by qualified lenders that meet certain standards.

“Borrowers with Fannie Mae- or Freddie Mac-owned loans can benefit from the Flex Modification Program,” said Jennifer Harder, founder and CEO of Jennifer Harder Mortgage Brokers, in an email to The Balance. This program replaces the now-expired Home Affordable Modification Program (HAMP), as well as the “Standard” and “Streamlined” modification programs previously offered by Fannie and Freddie.

With a loan modification, a lender makes changes to the term of your loan so that payments are more affordable and you avoid foreclosure. Harder said the Flex Modification Program is designed to lower an eligible borrower's monthly mortgage payment by approximately 20%. This is done by first capitalizing delinquent or outstanding payments (tacking them onto the current balance), reducing the interest rate, then extending the repayment period to 40 years from the modification date.

When you apply, the servicer will adjust loan terms to reach the 20% payment reduction. In some cases, they will have to reduce the amount of principal used in the calculation. This principal is not forgiven; it’s “forborne” and no interest is charged on it. Forborne principal must be repaid when the home is sold, paid off, or the loan refinanced.

“You must successfully complete a trial period plan before the servicer can finalize the adjustment,” Harder said. The trial lasts three months and shows your loan servicer that you’re capable of handling the payments. “If you make all of the trial payments, you'll get a permanent loan modification,” she said. This will likely waive any past late fees, penalties, or other fees as well. However, if you miss a payment during the trial period, you’ll no longer be eligible for modification and could default.

It is possible to have your mortgage modified under the Flex Modification Program while also going through bankruptcy proceedings.

Flex Modification Eligibility

“Anyone having problems paying their mortgage can apply to this program as long as they meet the requirements,” said Paul Sundin, a CPA, tax strategist, and CEO of Emparion, in an email to The Balance. The most basic requirement is that Fannie Mae or Freddie Mac should own the loan. Additionally, the loan must be a conventional first mortgage, and the borrower must have borrowed it at least one year before applying for the modification. “The applicant should also have a stable source of income and proof of the ability to pay monthly,” Sundin said. There may be other requirements as well, which vary from lender to lender, he added.

If all the requirements are met, the borrower goes through a trial modification period. If everything goes according to plan, the monthly mortgage payments are permanently changed when the final capitalized amounts are known.

Types of Flex Modification Programs

Aside from the traditional Flex Modification, there are variations of this program designed for homeowners experiencing different types of hardship. The table below breaks down these differences in eligibility, using the “Streamlined” evaluation process.

  Flex Modification Flex Modification for Disasters
Hardship Required? No hardship confirmation required. Yes: Mortgaged premises or place of employment must be in an eligible disaster area
Delinquency Requirements for Streamlined Offer At least 90 days delinquent

OR 

At least 60 days delinquent and have a Step-Rate mortgage
At least 90 days delinquent

OR 

At least 60 days delinquent and have a Step-Rate mortgage

AND

Current or less than 31 days delinquent as of the date of an eligible disaster

How to Apply for Modification

To find out if you qualify for the Flex Modification Program, start by verifying whether your loan is owned by Fannie or Freddie. You can do this online (check Fannie Mae here and Freddie Mac here). Then contact your loan servicer to find out your next steps. “The conditions for obtaining this type of alteration are lengthy and complex,” Harder said. Your servicer can walk you through the exact qualifications.

Note that when a borrower is 90 to 105 days behind on payments, servicers automatically send them a trial plan offer based on their existing information on file. Even if you don’t accept the initial offer, the lender can continue to offer you a trail plan until shortly before foreclosure.

Frequently Asked Questions (FAQs)

What debt-to-income ratio do I need for Flex Modification?

Your debt-to-income ratio (DTI) measures how much of your monthly gross income goes toward paying back debt, expressed as a percentage. Usually, lenders have a maximum DTI they allow when approving mortgages. However, when it comes to mortgage modification programs, lenders tend to set DTI targets rather than hard requirements. For example, for borrowers who are less than 90 days delinquent on their loans, Fannie Mae aims to get them to a housing expense-to-income debt ratio of 40%—but that’s not required to enroll in the program.

What credit score do you need to get a Flex Modification loan?

There are no credit score requirements in order to be approved for the Flex Loan Modification Program. Since it’s designed for mortgage borrowers who are behind on payments and in danger of defaulting, it’s assumed their scores are already quite low. The goal is to make payments more affordable and get borrowers back on track so they can keep their homes. It is important to note that lenders often report mortgage modifications to the credit bureaus, so having one on your report could cause your score to fall after the fact.

How do you negotiate a mortgage modification?

If you’re having trouble affording your mortgage payments, it’s important to contact your lender right away to discuss your options, including a possible repayment plan, forbearance, or loan modification. You should fill out a loss mitigation application, which includes details about your financial situation and is used to determine eligibility for loan modification. Even if you’ve been denied a modification in the past, you should try again, as changing circumstances could mean you get approved this time.