How HAMP Can Save Your Home
HAMP Mortgage Modification -
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LOAN AND DEBT
HAMP Mortgage Modification Program – How It Can Save Your Mortgage
The HAMP mortgage modification program is one of the fiscal recovery
initiatives to come out of the Obama administration. It is aimed at helping
homeowners who are having trouble meeting their monthly mortgage
payments and fear they may soon face foreclosure on their homes.
HAMP – What it Is
HAMP stands for Home Affordable Modification Program. It was unveiled
in March of 2009 as part of the $787 billion American Recovery and
Reinvestment Act of 2009. The act is better known as the federal stimulus
package. The government set aside $75 billion to assist homeowners who
are facing possible foreclosure. $50 billion of the $75 billion will be paid
from Troubled Asset Recovery Program (TARP) funds.
The money is used to allow lenders to modify home owner's mortgages so
they have a lower house payment that they will be able to afford. The
government then pays the lenders to compensate them for their loss on
the mortgage. The program's goal is to allow between 4 and 5 million at-
risk homeowners to modify their mortgages.
In August of 2009, the government announced a companion program,
FHA-HAMP. As the name suggests, that program is for mortgage holders
with FHA mortgages.
HAMP – Can I Qualify?
The qualifications for HAMP are relatively simple. If your loan is backed by
Fannie Mae or Freddy Mac, you do not have to actually default on your
mortgage to qualify. That is a common misconception among
homeowners. The majority of mortgages in the U.S. are backed by either
Fannie or Freddy.
Here are the Qualifications for the HAMP:
1 – Your mortgage payment must be greater than 31% of your monthly
adjusted gross income. The 31% includes any applicable taxes, fees, and
insurance, in addition to the loan payment.
2- You must be the owner and occupant of the property. This program is
not for investment properties or second homes.
3 – The mortgage origination date must be on or before January 1, 2009.
4 – The outstanding mortgage balance must be below $729,750 for a
single family residence and $934,200 for a duplex.
5 – Your lender must be a HAMP participant.
6 - Any borrowers wit a debt to income ration exceeding 55% will be
required to participate in a government approved debt counseling
7 – Second mortgage or lien holders must agree to take a subordinate
position to the first mortgage holder.
8 – HAMP participation is a one time deal provided by Uncle Sam (The
Obama Administration). If you have additional problems you cannot use
the program again, so if you've already participated, you do not qualify.
What Do I Need to Do to Get HAMP to Help Me Modify My Mortgage?
Get all your paperwork together, just as when you got your loan in the first
place. You'll need prof of income, or lack thereof. If you have absolutely
no income, you cannot qualify, as you must have the ability to repay the
loan. You will also need to supply your lender with proof of residence.
How Will HAMP Modify My Mortgage?
Your mortgage rate will be adjusted so that your total payment does not
exceed the 31% figure. The mortgage interest rate can be modified to as
low as 2%.
If the interest rate must be lower than 2% in order for the payment to
meet the threshold, the lender will then attempt to stretch the term of the
mortgage to as long as 40 years (480 months).
Forbearance - If the term cannot be stretched to 40 years and keep the
interest rate above 2%, the lender will forgive some of the loan principal
such that the 2% interest rate is achieved. This is the last option.
Do I Have to Use the Same Lender that My Mortgage is Through Now for
No, you can use any lender that is approved through the program.
Why would my lender or loan servicer participate in HAMP?
Easy, it's because the federal government pays them to do so. That's
right, the federal government incentivizes each lender and loan servicer to
participate in the HAMP program as follows:
Lenders can get:
* A bonus incentive of $1,500 for any loan modified while the borrower is
still current (including less than 30 days delinquent), subject to some
* Reimbursement for part of the difference between the “new,” modified
mortgage payment and the “old” mortgage payment. The government
would pay this to the lenders for up to five years.
* Some compensation to offset losses on previously-modified loans
Loan Servicers can get:
* An initial payment of $1,000 for each successful modification.
* Annual payments of up to $1,000 for the first three years following
successful modification if the borrower stays in the program.
* A bonus incentive of $500 for any loan modified while the borrower is
still current (including less than 30 days delinquent).
What about you? Are you eligible for any freebes, in addition to the huge
bonus of having your mortgage modified so you can afford to stay in your
home? Of course, this is in the spirit of the Obama administration's income
redistribution program. If you act now, before the program's funds are
exhausted, you can receive the following bonus:
Principal reductions of $1,000 for each year they make mortgage
payments on time under the program (for the first 5 years).
This could equal a $5,00 reduction on your mortgage principal. If you
consider financing charges, it could mean over $10,000 extra dollars in
your pocket, free, from "the Government"!
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