subject: Qualifying For A Home Loan Modification [print this page] The Home Affordable Modification Program, or HAMP, is a federal program that encourages mortgage lenders to modify the loans of borrowers who are having trouble making their monthly mortgage payments. HAMP is one piece of the Obama administration's strategy to help responsible homeowners avoid foreclosure during the economic crisis. The program is not designed to help every homeowner. Borrowers must meet the requirements of the program to qualify for loan modification.
This program can not only help borrowers who are behind on payments, but those who have been responsibly making their payments but are facing imminent hardship. Contacting the lender as soon as possible to start the loan modification review process is key to a successful resolution. Participation in HAMP is mandatory for servicers of Fannie Mae and Freddie Mac loans. For loans that are not government sponsored, the HAMP and other Making Home Affordable programs are voluntary. However, because of government incentives, many lenders choose to take part in the programs.
In order to potentially qualify for a loan modification through HAMP. there are several requirements.
- Borrowers must live in the one to four unit dwelling that they seek to modify the mortgage on.
- The unpaid balance must be within the limits set by the program.
- The mortgage must be a first lien and originated on or prior to January 1, 2009.
- The monthly mortgage payment is not affordable because it is more that 31 percent of the borrower's gross income
For a homeowner who has been making their payments on time to qualify for a modification to their loan, they must prove that they are at risk of not being able to make the payments. Because this is not as easy to prove as a rate adjustment or unemployment, seeking the help of a loan modification attorney is advisable.
HAMP offers solutions other than reducing the interest rate for homeowners, but borrowers who apply for a modification on their own may not be presented with the most attractive options. A loan modification attorney can ensure that the lender considers all available alternatives. Under this program, the lender has the option of reducing the interest rate to as low as 2 percent, extending the term of the loan to 40 years, or forbearing a portion of the principal. Some lenders even voluntarily give principal reductions, which forgives part of the principal on the loan. Experience loan modification attorneys know which lenders give reductions in principal.
It is important to get the required documents to the lender as soon as possible, especially for borrowers who are current on their mortgage. A loan modification attorney can make sure the papers are filled out correctly before they are sent to the lender, giving the modification package the best chance of being approved immediately. After a complete package is received by the lender, a trial modification period of three months is set up for the borrower. During this time, the borrower must make the new payment amount on time every month. If, after three months, timely payments have been received, the modification is finalized.
