The Home Affordable Modification Program or HAMP, was created to help homeowners who are facing foreclosure keep their homes. HAMP is part of the Making Home Affordable Program created by the Obama Administration to help homeowners facing foreclosure, stabilize the nations housing market, and aide the nation’s economy. By providing mortgage rate reductions, term extensions, or principal forbearance, HAMP and is designed to lower the homeowners monthly mortgage payment to 31% or less, of pre-tax income. This important loan modification program comes at a time when many homeowners are struggling to make ends meet.
How Do I Qualify for HAMP?
- Must own a one to four unit home that is your primary residence;
- Received your mortgage on or before 1/1/2009;
- Mortgage payment (principal, interest, taxes, insurance, and HOA dues) that is more than 31% of your pre-tax income, and;
- Owe less than or equal to $729,750 on your first mortgage for a single unit property. (There are higher limits for multi-unit properties)
- Have a mortgage payment that is not affordable due to a documented financial hardship
What happens next?
Homeowners qualifying for HAMP must successfully complete a 3-4 month trial period by making their lowered mortgage payment on time before their loan will be considered for permanent modification. Your mortgage provider will take a series of steps in order to lower your monthly payment in this order:
- Lower mortgage rate to as low as 2%
- Extend the term of the loan up to 40 years
- Principal Forbearance or deferral
The loan modification agreement will specify your new modified interest rate. This rate will be fixed for the first 5 years at minimum and then beginning in year six, the rate may increase by no more than one percentage point per year until it reaches the current market interest rate at the time your permanent loan modification agreement is prepared.
As an incentive to make on-time payments, homeowners who pay their mortgage on-time can earn an incentive of $1000 each year up to $5000 to reduce their principal.
What if I am already facing foreclosure?
Mortgage providers participating in HAMP, are required to evaluate mortgagees for eligibility in HAMP before proceeding with a foreclosure sale. Foreclosure sales are not permitted while the loan is being considered for modification or during the trial period.
Do I need to be behind on my mortgage payments to qualify for HAMP?
No. Homeowners that are experiencing difficulty meeting their monthly mortgage obligation and believe they are in “imminent default” should contact their loan provider immediately. You will be required to provide documentation of financial hardship or change in employment status.
Does participation in HAMP affect my credit?
Maybe. Participation in HAMP can affect your credit and your mortgage provider is required to report your loan status prior to approval and while participating in the program.
What if I am unemployed?
If you are unemployed contact your loan provider immediately. Your payments may be reduced to 31% of your pre-tax income or suspended for 12 months or longer depending on your situation. The Home Affordable Unemployment Program was specifically designed for homeowners that are unemployed and facing foreclosure.