All about HAMP, the Home Affordable Refinance Program

Thank you for the question about the HAMP loan modification program.

It is important to speak with the right person and department in your bank. However, it is equally important to be knowledgeable about your alternatives before you speak with your servicer about a HAMP loan modification. Make sure that you are aware of your options.

In 2009, President Obama initiated the MHA (Making Home Affordable) program to address the distressed housing market. Three different programs were set up in order to help different types of borrowers, as follows:

1. HAMP (Home Affordable Modification Program): The HAMP program helps distressed borrowers with a financial hardship modify the terms of their loan in order to avoid foreclosure. The modification may include a longer term, lower interest rate, change from an adjustable to a fixed interest rate, or principal reduction. The modified loan helps the borrowers stay in their home and avoid defaulting on their loan.
2. HARP (Home Affordable Refinance Program): The HARP program helps underwater borrowers, who are making their payments on time, refinance into a lower interest rate and longer period loan. The new refinance will help borrowers stay in their homes with affordable payments.
3. HAFA (Home Affordable Foreclosure Alternatives): The HAFA program helps borrowers who cannot afford to make payments avoid foreclosure by working with their lenders to an agreed short sale or deed-in-lieu.

To determine if the HAMP program is the right option for you, and how to get in touch with your mortgage company learn:

• What are the basic HAMP eligibility requirements?
• Who to contact about a HAMP loan modification?
• What is the process to get a HAMP?

What are the Basic Eligibility Requirements?

Like any mortgage program, underwriting guidelines are technical and cover a wide range of possibilities. You can find more information regarding your HAMP eligibility on HUD’s (the Department of Housing and Urban Development) Making Home Affordable (MHA) Web site. In addition, your mortgage company will analyze your personal situation to help you determine if you are eligible for a HAMP modification, or a different program.

Here are the basic HAMP eligibility requirements:

Property and Loan requirements:

• Property is owner occupied property.
• Freddie Mac or Fannie Mae owns first mortgage loan.
• There are also FHA and VA HAMP programs.
• Loan was taken on or before January 1, 2009.
• Loan amount is not over $729,750.
• Loan can be modified only once under HAMP, but can be previously modified by lender program.

Borrower requirements:

• You will need to prove a financial hardship.
• You will also need to show that your income is sufficient to make the payments.
• You can enter a trial period if you are either more than 60 days delinquent, or you are current or less than 60 days delinquent, but can show that that you are in immediate danger of default.
• Your current monthly housing expense-to-income ratio is greater than 31% of verified gross monthly income. (Your monthly payment includes principal, interest, property taxes, property insurance and HOA or condominium fees).

Editor’s Note: For updated information read the Bills.com article about updated HAMP guidelines.

Who to Contact About a HAMP?

The first place to turn to is your mortgage company servicer. This is true whenever you are having a problem making a payment, whether it is due to a technical problem, a temporary financial problem, or a long-term financial hardship. Every servicer has a department that deals with mortgages in trouble. Servicers have a number of solutions at their disposal. The general rule is that lenders want to help you avoid foreclosure. Service will vary by lender and customer representative. If you are not getting good service, then ask for a supervisor.

HAMP like other mortgage products are technical and complex. You will need good guidance. Here are places to look for help:

1. Your mortgage company: Check your mortgage statements for phone numbers and names of contacts. Many lenders have departments that specialize in mortgages in trouble. Check your servicer’s Web site for information about loan modifications.

Here are a couple of examples of big lenders/servicers: 

• Wells Fargo dedicated a page to loan modification, including HAMP modification. 
• Bank of America also has a web page dedicated to HAMP.
• Both of these lenders also provide toll free telephone numbers and advice on how to proceed with their HAMP process. 

2. MHA resource: An additional resource, as provided by the MHA website is the Homeowners HOPE hotline at 1-888-955-HOPE. Call the number for clarification of the HAMP program or if you feel the lender improperly denied your modification.

3. MI (Mortgage Insurance) company: If you have mortgage insurance then contact your MI Company. Many MI companies have resources to help you when you start falling behind in payments.

What is the Process to Get a HAMP?

The mortgage loan process is complicated. Underwriting rules are complex and technical. You are required to fill out forms, provide financial information, and deal with a stressful financial situation. Remember, it is up to the lender to guide you through the process. Here are the steps to take:

1. Evaluate your financial situation. Examine your budget and see what kind of payments you can afford. It doesn’t help to go through a modification and then not be able to make your monthly payments. The current guidelines stipulate that your monthly mortgage and property related payments must exceed 31% of your income. (There is talk of including second mortgage payments and medical debt). 
2. Contact your servicer as soon as you realize that you cannot make your payments. Contact their modification department or customer service department and ask for a specialist.
3. Receive an explanation of the program. Ask if there are other programs better suited to your financial situation. Lenders have their own modification programs as well as the HAMP.
4. Receive an application package from your mortgage company. This includes an application form, IRS Form 4506-T (request for tax return transcripts), and Dodd-Frank Certification Form. You will need to complete all the forms and submit proof of income and residency.
5. Fill out the forms and send them back to your customer service representative. Ask the customer service representative any questions you have about filling out the forms and the information you need to provide. A successful modification depends on getting the right information.
6. It takes time for an approval. If approved, you will be put on a 3-month trial period to help you and the lender determine that the new payments are manageable. Your payment is based on the new lower payment as if the loan is permanently modified. Make sure that all your payments are made on time.
7. Upon successfully completing your trial period, you then will need to complete additional documentation, and possibly go through housing counseling. Once again, be patient. You will then receive a modification agreement, which outlines the new terms of the loan. You will be required to sign, notarize and send back the agreement to make the modification permanent. Don’t forget to make your payments on time and ask any question you have.

Many borrowers have successfully completed HAMP modifications, but many have either been rejected or dropped out of the program. Make sure that you review all your options. Keep making your payments and work out the best possible payment schedule, whether it is through a HARP, HAMP or HAFA.