Home Affordable Modification Program – HAMP


loan modificationThe 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:

  1. Lower mortgage rate to as low as 2%
  2. Extend the term of the loan up to 40 years
  3. 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.

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12 Responses to Home Affordable Modification Program – HAMP

  1. Jai Catalano 02/27/2012 at 6:39 pm #

    I have tried to do remods and for a million reasons and 1 they keep saying no. Truth be told I moved out and had my brother move in to keep it afloat. The gov then says it’s an investment property. I said no it’s a strategic way to keep living.

    • Paul 02/27/2012 at 7:16 pm #

      Unfortunately the banks have the final say in whether you “qualify” for a loan modification. You do have 30 days to appeal the denial.

  2. SB @ One Cent At A Time 02/27/2012 at 8:17 pm #

    You sure to get some SE visitors out here. I never heard of HAMP before, makes sense, I am not a home owner yet, wasn’t supposed to know…

  3. Jackie 02/27/2012 at 8:56 pm #

    Interesting. I’ve heard about the Home Affordable Modification Program before but never knew any details. Do you have any data on how many people typically end up having their modifications go through?

    • Paul 02/27/2012 at 10:17 pm #

      I do know that the there have been 5.6 Million modifications to date and foreclosures have gone from 1.7 Million in 2010 to 843,000 in 2011. Unfortunately when HAMP was rolled out in April of 2009, loan modifications were running at about 125k per month. I only was able to find data through Dec of 2010 but according to a study done by Hope Now, HAMP has not lead to an increase in loan mods. This is why the recent changes were made to HAMP extending the program through the end of 2013 and expanding the numbers of individuals who will qualify for the program. I also read that the Treasury Department has tripled the payout to service providers who agree to reduce the principal amount on loans under the revamped HAMP.

  4. Marissa @ Thirty Six Months 02/28/2012 at 12:28 pm #

    I didn’t know this even existed, but i don’t think we have this option in Canada.

  5. AverageJoe 02/29/2012 at 11:22 am #

    Good piece on an often misunderstood program.

    I like the fact that this may apply to people who aren’t yet in difficulty, as long as they can provide proof that it’s on the way. But, like Jai said, proving it is a difficult matter….

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