How HAMP Can Help You
HAMP (Home Affordability Modification Program) program and is designed to give homeowners additional alternatives to foreclosure in the form of a Short Sale or Deed-In-Lieu of Foreclosure (DIL). This program ends on December 31, 2012.
The idea behind HAMP was to encourage lenders and homeowners to engage in loan modification, enabling homeowners to remain in their homes under affordable mortgage conditions and avoid foreclosure.
HAMP applies only to participating lenders.
Am I eligible for HAMP?
You must first meet the following basic eligibility requirements under HAMP:
- You are the owner / occupier of the property (up to four units). If the property has more than one unit, you must occupy one unit.
- Unpaid principal balance equal to or less than $729,750 (The principal amount increases with multiple units).
- Hold a first lien mortgage that originated before January 1, 2009.
- Total monthly mortgage payment exceeds 31% of monthly gross income.
- Mortgage delinquent or default reasonably foreseeable.
Once application is made, what happens?
Upon receipt of your application, your lender will determine whether to modify the loan.
Assuming modification is an option, you'll be offered a modification program on a trial basis. If you accept the plan and are successful in the trial period, a permanent modification is arranged.
Examples of modification plans:
- Reductions in interest rates to as low as 2% to achieve the 31% threshold. If this isn't viable, other options include, in order of priority:
- Extension of payment terms to up to 40 years.
- Forbearance: deferring a portion of the principal, interest free, until the maturity of the loan. At maturity (end of term, sale or refinance), a balloon payment would be required to pay the deferred principal.
- Forgiveness of part of the principal.