When Is the HAMP Program Available to Me If I’m Underwater?


There are numerous homeowners whose mortgage balance is more than double the present property value of the home. Many of these people have decided it may be impossible to refinance their property and are searching for other ways to deal with their property. Some have tried at least one form of refinancing for their depreciating mortgage, maybe through a loan modification. However, often find that lenders want at least 20 percent equity in the home.

Does that mean you are up a creek without a paddle if you do not have at least 20 percent of equity to refinance? Perhaps not! You may not have to give up hope quite so quickly. The industry is constantly trying to come up with options for you to refinance your home loan if that is what you want to do, and if you are sick and tired of traversing that route, a short sale may be the best route for many homeowners to get out from under their paralyzing mortgage problem. Some options are available through government programs, like the Making Home Affordable program. While others are available to anyone who is eligible.

So what alternatives do you have if your home values are worth less than half the amount you financed when you purchased the home and have missed payments to boot? Well, you may still qualify for a government program known as the federal Home Affordable Modification Program (HAMP), which is available through several mortgage lenders.

The qualifications for the HAMP programs include financial hardship that endangers your ability to pay your mortgage, and puts it at risk of default. In addition to Fannie Mae and Freddie Mac, other mortgage lenders that have registered with the United States Treasury may meet the requirements for HAMP. This is a relatively new program, so you’ll probably want to speak with your loan servicer to check if they are participating.

Michael Goldstein, a bankruptcy attorney and partner at Goldstein and Clegg in Lynnfield, MA, notes, “HAMP is not a refinancing program—it’s a change to the contract terms… but it can lower your payments for up to 60 months”.

Basically, HAMP gives the homeowner five years at a lower interest rate for 5 years, then on the sixth year, the rate may increase, but caps at 1 percent per year until, according to the Making Home Affordable website, it reaches “the market rate at the time the modification agreement is prepared”. According to John Walsh, president of Total Mortgage Services in Milford, CN, even outside of HAMP, there are many mortgage lenders offering their own different kinds of loan modifications. According to Walsh the mortgage lender “could amortize your existing mortgage to a longer term, a lower interest rate or forgive some of the principal balance of your loan”.

For some, a loan modification could be a good option. But the strict guidelines make it very for several property owners to qualify. One of those requirements is that the home has to be the primary residence, the mortgage loan must be less than $726,750, and the current monthly payment must be more than thirty-one percent of the borrower’s current gross income, finally, you must be able to show the homeowner has an impairment to making the current payments.

If you find you do qualify for the HAMP program, your loan modification will run a trial period of ninty days, after which time the lender will reassess the borrower’s situation to confirm that they still qualify for the long-term modification.

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