HAMP (Home Affordable Modifcation Program) was designed by the government to help homeowners that are struggling to make their monthly mortgage payments and are in risk of foreclosure. Working with a bank or lender, the borrower’s loan is reworked, which is called a Loan Modification, and with specific guidelines followed a outlined by the government, can lower the monthly payment. It is the intention of this plan to lower the payment and make it easier on the homeowner.
HAMP Guidelines and Requirements
The most basic guidelines are:
- Monthly mortgage payment is more than 31% of your gross monthly income
- Borrower is owner – occupant of the property
- Loan balance can not exceed $729,750
- Mortgage was originated before December 31, 2008.
- Borrower is currently delinquent and at risk of foreclosure
- Must have proof of income that new payments are possible
HAMP Guideline Differences
There are 2 different versions of HAMP (HAMP 1 and HAMP 2) and here we explain the differences:
This program is geared for owner-occupant and of the two loan modification programs, this one is more common. When a borrower inquires with their lender about a Loan Modification, they will recommend this one first.
With HAMP 1, the loan is modified with a lower payment and increases annually back up the original payment, where it will stay. The original loan balance remains but the life of the loan is extended.
This program is the back up for those that don’t fit all the qualifications of HAMP 1 or are denied for other reason. This program is for property that is not owner-occupant. Some additional guidelines were implemented for this tier:
- Default on HAMP 1 and you are eligible to apply for HAMP 2
- Property that is not owner-occupied is eligible with some restrictions
- Default of HAMP 1 must be more than a year old
- The original mortgage amount is reduced as well as the interest rate and payments
Which HAMP Program is for you?
So for homeowners that have suffered job loss or cut in wages and are now struggling to make their monthly mortgage, the government has designed these programs to help. Is some ways it is similar to refinancing with the exception the borrower isn’t required to come up with a down payment as they are with refinancing.