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The Home Affordable Modification Program (HAMP)

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In response to the skyrocketing mortgage defaults and the recession in the 2000s, Congress responded with the Making Home Affordable program in order to help homeowners to avoid foreclosure and stay in their homes. A major part of the Making Home Affordable program is the Home Affordable Modification Program, or HAMP. Its goal is to induce mortgage servicers and lenders to modify mortgages so that the payments are more affordable for homeowners.

Eligibility for HAMP

Homeowners may be eligible for HAMP if they meet all of the following requirements:

  • The outstanding balance may not be higher than $729,750 for a primary residence, although the amount is more if the property has between two and four units
  • The loan must have been originated prior to Jan. 1, 2009
  • The property cannot be condemned
  • For mortgages on primary residences, the borrowers must be at risk of defaulting
  • For mortgages on second homes or investment properties, the borrowers must be in default
  • The borrower must be undergoing a financial hardship
  • The borrower must be able to show that he or she has sufficient income to make modified payments
  • Within the past 10 years, the borrower must not have been convicted of felony money laundering, tax evasion, forgery, theft, fraud or larceny that was connected to a real estate transaction or a mortgage.

HAMP Expansion In June 2012

Effective June 1, 2012, the Obama administration expanded HAMP, eliminating some of the earlier eligibility requirements. The government removed the debt-to-income ratios that had previously been required and changed the program to allow HAMP modifications for homes that are not the primary residences of the borrowers. People who have previously defaulted on HAMP modifications are also now eligible under the expansion.

People might want to apply for HAMP if they want to modify the mortgage on a second home or an investment property of between one and four units. If a person was previously ineligible because of his or her debt-to-income ratio, he or she may now want to reapply. If people either defaulted on their trial-period payments or defaulted on a permanent HAMP loan, they may also want to reapply for HAMP.

Trial Period

When a lender agrees to modify a loan under HAMP, the borrower begins with a 3-month trial period. If the person makes his or her trial-period payments on time, the modified loan agreement will be made permanent.

HAMP Loan Applications

It is important for people to follow up on their applications and keep after the bank to follow the rules of the program. Banks are not always quick with reviewing HAMP applications despite the program’s requirements.

Homeowners should mail their HAMP applications by certified, return-receipt mail, a fax with confirmation or another method that gives proof that the applications were received. The lender is then supposed to provide confirmation that it received the application within 10 days, and it must be evaluated within 30 days.

Homeowners should follow up with the bank if they do not hear anything within the provided time frames.

Pending Foreclosures And HAMP

Foreclosure proceedings are supposed to be halted when people apply for HAMP modifications until the lenders review the applications. One exception to this rule is when a foreclosure sale is scheduled within 7 days.

Borrowers should make certain to get written confirmation that the foreclosure has been postponed. If the lender will not provide written confirmation, the person should contact an attorney for help.

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