The US economy is struggling and to help it’s citizens that own homes, the Federal Government has created some initiatives. The first stimulus was designed to increase job growth. The second stimulus was structured to ease credit restrictions to help those Americans that are deep in debt. In that effort, the HAMP Program was created to help homeowners.
What Is The HAMP Program?
HAMP is short for Home Affordable Modification Program, and has the sole purpose of home loan modification for homeowners. This loan modification is meant to bring the homeowner’s mortgage payment into an afordable range for the homeowner by either lowering the interest rate, extending the note or both. The thought is if the payments are lower and easier to make, the homeowner can avoid foreclosure.
How Does Current Value Of Housing Work With HAMP?
This program was developed to assist lenders in determining if a borrower could or should modify their loan. Financial institutions have always considered the NPV of an asset when determining what is in best interest for the borrower and them. HAMP provides a special NPV calculation to help lenders decide a possible loan modification.
What Do Homeowners Gain From This?
Their payments are lowered so they can afford to stay in their home easier. Depending on the circumstances, the interest rate can be reduced, the term of the loan extended, the principal balanced reduced, or any combination of the three. For the right situation and meeting the requirements set forth, this is a great program.
What’s Changed With HAMP?
HAMP 1 and HAMP 2 both have not had the response that Congress anticipated. As such, Congress is considering new guidelines for Loan Modification to make it even easier. The new HAMP program qualifications, in general, are as follows:
- Proof Of Income Requirements Relaxed
- Source Of Income Allowed
- Less Documentation Required of Lender/Servicer
- Previous Denied HAMP Applications Can Re-Apply
What this means to homeowners, now that banks aren’t required to jump through as many hoops for the Loan Modifications to be approved by the Treasury Department, borrowers won’t have as much paper work to submit either.
There are still too many delinquent mortgages and the housing market is still suffering. The government is hoping by easing up on the restrictions of HAMP, it will encourage more borrowers to apply for HAMP and encourage more lenders to work with HAMP applications.