Home Affordable Modification Program (HAMP) for troubled homeowners

Those homeowners who face a major hardship that could cause to a foreclosure they may choose to work with a lender to get the loan modification and sometimes it is also called mortgage modification and restructuring. Mortgage modification change the terms of the mortgage and make the borrowers to afford the payments. For mortgage modification the lender allow the homeowner to refinance the loan by paying a lower interest rate as well as extend the duration of his loan skipping the payments and homeowner is also allowed to add the payments in the total amount of loan or he can also add all past dues into the total amount of loan modification. In 2009, administration of Obama introduced a program namely the Making Home Affordable Modification Program.

It is a plan to preserve and secure the housing market and to help the struggling homeowners to get free from the complications and avoid foreclosure in March 2009, the Treasury Department announced a consistent guidance for loan modifications all over the mortgage industry and as well as updated and expanded that guidance in the policy announcements series.

Introduction of Home Affordable Modification Program:-

Home Affordable Modification Program (HAMP) was created in 2009 by the government which is a part of the government’s Making Home Affordable Program which was designed to provide the relaxation to troubled homeowners. Home Affordable Modification Program (HAMP) facilitates the troubled homeowners in the sense to reduce the mortgage payments to bring down these payments to 31 percent of homeowners pre-tax monthly income. By using this guidance homeowners can estimate that how much of their mortgage payments are reduced by using Home Affordable Modification Program (HAMP). All of the lenders do not participate in the HAMP but homeowners may be able to work with the lenders for a loan modification. Basically Home Affordable Modification Program (HAMP) is designed to provide the deep and meaningful savings to the homeowners who destroyed a lot of money in increasing expenses or reductions in their income.

How a Borrower can qualify for a loan modification?

Those lenders who do not participate in the Home Affordable Modification Program (HAMP) can also offer a loan modification. But to qualify for a Home Affordable Modification Program (HAMP) one should have these options;

• Have received his mortgage before 1 January 2009 or in Jan 2009. Borrower should be in debt maximum $729,750 on his primary property or single unit rental residence and $934,200 for a two unit rental property. But other than this government sets some of the higher limits for rental properties having more units.
• Borrower should have enough documented income which could be paid for mortgage if mortgage is modified.
• Borrower should have a financial hardship because of which he is in danger of becoming irresponsible for his mortgage payments. Mostly homeowners should show that they are facing the serious financial hardship such as huge income loss, illness or divorce which is causing them at the risk of their mortgage payments. They have to prove this hardship through documentation and also have to sign an affidavit for that effect.

Other than these points most of the homeowners will need to provide the some of the important documents to their lenders for a loan modification. These certain documents include recent pay receipts, tax returns, list of resources and their estimated values, loan statements and credit card and a letter which highlight the financial hardship which they are facing. Once all of the information is collected then borrowers should call to their mortgage servicer or lender. Borrowers should not be late for payments to qualify for a loan modification.

Affect of a loan modification on the credit:-

Those borrowers who are participating in the Home Affordable Modification Program (HAMP) they are probably not to face a sink in their credit score because the government has set up such requirements according to which Home Affordable Modification Program does not currently affect the credit score. But there is no guarantee that a loan modification generally does not affect the credit score it can be or cannot be.

Alternatives to a loan modification:-

If someone does not qualify for the loan modification and mortgage payments are not affordable for him, there are some of the other options to avoid foreclosure. These options include;

• By short selling the home in which homeowner and bank work on a deal which allows the homeowner to sell his house for less than the price originally his property has.
• To hand over the house back to the lender using a “deed-in-lieu” of foreclosure.
• Receiving a resignation in which lender reduces the borrower’s loan payments usually for 90 days.
• To find out an occupant who will rent the home or will use that money to pay the lender.

Maintaining the Home Affordable Modification Program (HAMP):-

To get the affordable mortgage applying for a Home Affordable Modification Program modification is very important and first step but to get a modification is just the beginning of loan modification. It is important to take the necessary steps to maintain the good position in HAMP to fully benefit from advantages of HAMP. Some of important standings are;

• Terms of mortgage should be fully understood.
• Modification payments should be made full and on time.
• Should be preparing for future payment changes.
• Financial health should be improved for long-term success.