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What is the Home Affordable Modification Program?


What is the Home Affordable Modification Program?

The Home Affordable Modification Program (HAMP) is a federal mortgage modification program targeting homeowners at risk of foreclosure.

First announced in March 2009 as part of the broad Making Home Affordable program, HAMP is designed to help homeowners who are employed, but who are struggling to make their mortgage payments due to a financial hardship.

HAMP was originally meant to help up to four million homeowners permanently modify their mortgages. But since the program began, only 1.4 million permanent loan modifications have been made through HAMP, according to the latest data from HUD.

The deadline to modify your mortgage under the Home Affordable Modification Program is Dec. 31, 2015. 

Do I qualify for HAMP?

HAMP aims to modify the terms of a distressed homeowner's mortgage in order to make their monthly payments more affordable. It does so by lowering mortgage rates, lengthening terms and offering principal forbearance. According to recent data, HAMP lowers mortgage payments by a median of $490 per month.

Here's the full list of HAMP requirements:

  • You must be struggling to make mortgage payments due to a financial hardship
  • You must be delinquent or in danger of falling behind on your mortgage
  • You must use the property as your primary residence or as a one-to-four unit rental property
  • You must owe no more than $729,750
  • You must have taken out your mortgage before January 1, 2009
  • You must not have been convicted of a crime within the last 10 years in connection with a mortgage or real estate transaction
  • You must have a total housing expense -- including principal, interest, property taxes, insurance, and homeowners' association dues -- that exceeds 31 percent of your gross income

5 ways to prepare for a HAMP modification

Once you determine that you're eligible for HAMP, it's time to start preparing. Here are five tips to help you maximize your chances of a permanent mortgage modification:

No. 1: Understand the odds

Only 1.4 million permanent HAMP modifications have been made to date out of a projected 4 million.

Why hasn't HAMP gained more traction?

For one, HAMP is voluntary. Only Fannie Mae and Freddie Mac lenders are required to participate. Other lenders only participate if they want to, and they can design different modification strategies or rules as they see fit. Lender participation has also suffered due to constantly changing rules which make it difficult for mortgage lenders to update their procedures and train their employees accordingly.

No. 2: Document every step

Two almost-universal experiences related by those seeking HAMP modifications: the constant miscommunication and the repeated loss of documents.

Here are some ways you can help your cause and speed up the process:

  • Keep a file of everything you send and when you send it
  • Update and organize your file every week
  • Call the lender weekly to get the status of your modification
  • Make sure your trial payments are made on time, every time

No. 3: Understand the latest loan modification guidelines

Your lender's loan modification employees may not be well-versed in the latest guidelines, so don't rely on their knowledge. It is very common for applicants to get different interpretations of the same rules from different employees within the same company. The Government Accountability Office (GAO) recently reported that loan modification guidelines were being applied very unevenly across the nation's lenders.

No. 4: Reapply if you are denied

HAMP guidelines don't include provisions for any appeal process. However, you are allowed to reapply if your circumstances have changed after your denial.

No. 5: Stay positive

If you can jump through the hoops, a mortgage modification can be worth the hassle. A successful loan mod can save you a lot of money, not to mention your home.

Can I get a mortgage modification? 

Borrowers in the following situations may have greater success when asking their mortgage lender for a loan modification:

  • Borrowers who are underwater on their home loans. If the lender cannot recoup their money in a foreclosure sale, it has more incentive to work things out with you.
  • Borrowers who live in non-recourse states. Those in non-recourse states have better luck with modifications because lenders cannot sue them for deficiencies. The specific statutes can be complicated and may differ by type of loan, but according to the Federal Reserve Bank of Richmond, Alaska, Arizona, California, Iowa, Minnesota, Montana, North Carolina, North Dakota, Oregon, Washington, and Wisconsin are non-recourse states.
  • Borrowers in a position to file for bankruptcy to avoid deficiency judgments. An hour with a good bankruptcy lawyer can pay big dividends.
  • Those who have resolved their problems. For example, those who find new jobs, or who have enough income to make a reasonably modified payment.
  • Those who can document a genuine hardship. This could include catastrophic medical bills, for instance. On the other hand, if your difficulties are due to bad money management, the mortgage lender has little reason to believe that a modification will stick. Here's how not to write a loan modification hardship letter.
  • Borrowers with no assets. Or assets like retirement funds that are protected in bankruptcy proceedings.

Can I modify a first and second mortgage through HAMP?

In order to modify both a first and second mortgage through HAMP, you must meet three additional requirements, according to MakingHomeAffordable.gov:

  1. You must have modified your first mortgage under HAMP
  2. You must not have missed three consecutive monthly payments on your HAMP modification
  3. You must not have been convicted of a crime within the last 10 years in connection with a mortgage or real estate transaction

Can I modify a rental-property loan through HAMP?

The general answer is "yes," mortgages on one- to four-unit rental properties are eligible. Your rental property may be eligible for a HAMP modification if it is rented or available for rent year round, according to MakingHomeAffordable.gov. But a vacation home or a home you rent to tenants for only part of the year would not be eligible.

Am I eligible for HAMP despite my recent bankruptcy?

According to the Justice Department, you're eligible for HAMP even if you have received a chapter 7 bankruptcy discharge. Of course, you must meet all other HAMP requirements.

HAMP Timeline

  • March 2009: HAMP is announced
  • April 2009: HAMP launches
  • July 2009: FHA launches the FHA Home Affordable Modification Program
  • January 2012: HAMP deadline extended to December 31, 2013
  • January 2012: Eligibility for HAMP expands – including more flexible debt-to-income criteria and preventing foreclosures of rental properties -- to reach a broader pool of distressed borrowers and increases incentives for servicers to provide modifications
  • June 2012: The Obama administration introduces HAMP Tier 2, expanding HAMP to borrowers who did not meet eligibility requirements under HAMP Tier 1
  • May 2013: HAMP is extended until Dec. 31, 2015
  • December 2014: The Treasury and HUD announce all homeowners in HAMP will be eligible to earn an additional $5,000 in their sixth year of modification

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