Home Affordable Modification Program (HAMP) – What You Need To Know

What Is the Home Affordable Modification Program (HAMP)? 

The Home Affordable Modification Program (HAMP) is an initiative created by the federal government to help people cope with the collapse of the housing market. Not just because of the problems in the housing industry but also due to the global meltdown of the economy many homeowners began to face problem in meeting their monthly debt obligations. 

Since the payment on a mortgage loan is usually a single biggest payment that a consumer is to pay, this loan is more susceptible to the default. The consequences of defaulting on a home loan are severe for the lender as well as for the homeowner.

Due to reduced income and loss of jobs that many people faced government launched the Home Affordable Modification Program in order to release some of the financial pressure that’s the borrowers were facing. 

The Home Affordable Modification Program (HAMP) is designed to assist people who are facing financial difficulties and are finding it difficult to make the current monthly payments on their mortgage and running the risk of foreclosure.

Eligibility for the Home Affordable Modification Program

In order to be eligible for this Program you must needs the following conditions.

  1. You are a home owner of one to 4 units property. 
  2. Have an unpaid balance on the mortgage. 
  3. Have a first lien mortgage that originated on or before January 1, 2009. 
  4. Have a mortgage payments that is more than 31% of your gross income. 
  5. Have a documented financial hardship to explain why mortgage payments are unaffordable 

If you meet all of this above criteria you can do a check online to confirm whether you are eligible for the Home Affordable Modification Program or not. The online check enables you to see your eligibility as well as tell you the procedure to follow next. You can complete an online application to confirm your eligibility which will require you to keep the details of income and debt handy.

Home Affordable Modification Program (HAMP) – FAQ

Do I qualify for the Home Affordable Modification Program?

The best way to find out if you qualify for the Home Affordable Modification Program is to contact your lender. However the eligibility criteria for this program, in a nutshell, are:

  • You are the owner of a 1 to 4 unit residence.
  • Your unpaid principal balance on the mortgage is no more than $729,750 for one unit, $934,200 for two units, $1,129,250 for three units and $1,403,400 for four units.
  • Your first mortgage was originated on or before January 1, 2009.
  • Your monthly mortgage payment is more than 31% of your monthly gross income.
  • Your financial hardship due to which you cannot afford to make your mortgage payment is documented.

Can you qualify for Home Affordable Modification Program if you are unemployed?

The answer is no. You cannot qualify for the Home Affordable Modification Program if you are unemployed. However, you can be eligible for the Home Affordable Unemployment Program which provides for a reduction or an entire suspension of monthly payments on a mortgage for a certain period of time. 

This reduction or suspension is temporary. If you lose your job while in the middle of the trial period for the HAMP program you can ask to be considered for the Home Affordable Unemployment Program. 

However, if you have already received a prominent loan modification and subsequently become unemployed, you will not be eligible for the Unemployment Program.

Can I qualify for Home Affordable Modification Program if I am already behind on mortgage payments?

The application for the HAMP program needs to be made when you see a foreseeable change in the conditions in the future that might prevent you from making your mortgage payments. This could be a reduction or loss of income in the future or a foreseeable increase in the interest rate of a mortgage loan. 

Such proof of foreseeable financial difficulty should be presented as a documented proof in order to apply for the HAMP program. If you are already late on your mortgage payments then the chances of you being able to apply and qualify for the HAMP program are difficult.

Will the interest rate change during the term in the HAMP program?

Under the HAMP program the interest rate is set at lower than the market rate and is fixed for the first five years of the modified mortgage. This modified interest rate then increases one percentage point every year until it reaches the current market rate at that time. The maximum market rate that the loan can reach is set during the time of the approval of the modified loan program. Your interest rate can never exceed this rate.

What is the cost of the HAMP modification program?

There is no cost associated with applying for ordering qualified for the HAMP program. Now lender has any right to ask you for any sort of a fee in order to qualify you for this program. Asking you for a fee to render such a service is a violation of the federal law. 

Several HUD approved housing counselors will provide this service to you at no cost. Any taxes that you owe will have to be which can also be included in the new modified mortgage payment.

Will the HAMP modification affect my credit?

The HAMP modification should not affect your credit score. As long as you have remained current on your mortgage payments before the modification and continue to make the payments on your modified mortgage while part of the program, your credit rating should not suffer. 

However, the lender will report the loan to the credit bureaus as “modified under federal government plan”. However if you have fallen behind on your payments before getting qualified for the HAMP modification then this will have been reported to the credit bureau by the lender which of course might affect your credit rating as all late credit payments do.

Has You Been Rejected For HAMP? Here’s What To Do Next

Have you been denied a HAMP modification loan? If you are wondering why and what to do next, here are your options.

  1. First of all, view your denial letter. This will shed some light on why your application was denied.
  2. Secondly, get together the pertaining document together carefully. These usually include pay slips for the mortgage, tax returns, bank statements, statements for other debs, income proof and statement and documentation of the financial hardship that you are facing. You will also need to prove that you mortgage payment is more than 31% of your income. Any missing document will result in a denial for the HAMP modification program.
  3. Thirdly, you should consider your alternatives. While HAMP is a federal government initiative and probably stands to provide you with the maximum benefit, there may be other lenders that also offer hardship programs. 

You can first look towards your current lender and see if he is willing to offer any in-house solution. Since it is in the best interest of the lender to see that you continue to make payments on your mortgage, he may be very inclined to help you. Many lenders have adapted hardship programs and offer it to their borrowers who are facing genuine financial difficulties.

Many lenders allow loan modification and whether you seek it from another mortgage lender or find an in-house loan modification program from your current lender, you will be able to modify your loan in any one or all three key aspects of the mortgage loan i.e. Interest Rate, Term and Balance owed.