Loan Modification Under the HAMP Program

Frequently Asked Questions, Part I



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How Can I Find Out If My Lender is Participating In the HAMP Program?

Participation in HAMP is mandatory for lenders whose loans are owned or guaranteed by Fannie Mae or Freddie Mac. Participation in HAMP is voluntary for lenders of other loans.

However, substantial incentives are available to lenders who complete modifications under HAMP, and most major servicers already have committed to the do so.

You can check to see if your lender is listed on the servicer participant list here.

Do I Need to be Behind On My Mortgage Payments to be Eligible for A Modification Under HAMP?

If you are struggling to remain current on your mortgage payments you are eligible if you reasonably believe you are very likely to default on your mortgage soon (often referred to by loan servicers as "imminent default"). This might be because you have had (or will have) a significant increase in your mortgage payment (due to a payment adjustment or rate adjustment upwards); unemployment or some other significant reduction in income; or some other financial hardship that will make your mortgage unaffordable.

What are the Qualifications for Applying for a Loan Modification Under HAMP?

These are the requirements:

  1. You occupy your house as your primary residence;
  2. Your monthly mortgage payment must be more than 31% of your gross (pre-tax) monthly income;
  3. You have sufficient income to be able to make the adjusted payments.
  4. Your loan amount does not exceed $729,750.
  5. The mortgage was originated before Jan. 1, 2009.
  6. You have experienced a financial hardship.

Is The Interest Rate Subject To Change During The Term Of The Loan Modification?

If the modified rate is below the market rate as determined by the Freddie Mac Primary Mortgage Market Survey rate on the date your Modification Agreement is prepared, the modified rate will be fixed for a minimum of five years. In year six, the rate may increase but no more than one percentage point per year until it reaches the market rate at the time the Modification Agreement was prepared.

Your rate can never be higher than the market rate as indicated in your Modification Agreement. If the modified rate is at or above the market rate at the time the Modification Agreement is prepared, the modified rate is fixed for the life of the loan.

What Will My Lender Do To Get My New Modified Payment Down To 31% Of My Gross Income?

  1. Lower Your Interest Rate. The U.S. Treasury is providing incentives to lenders to write the interest down to as low as 2% to get to a payment that you can afford. Your interest rate will only be reduced to a point sufficient to get the modified payment to equal 31% of your gross monthly income.

  2. Extend the Term. If a 2% interest rate does not result in a payment that you can afford, your lender will extend your payment term. Your lender may extend the term of your loan up to 40 years.

  3. Forbear (Defer) Principal. If your payment is still not low enough, your lender may defer a portion of the principal amount you owe until the maturity of the loan. This is called a principal forbearance. With a forbearance, you will still owe the principal; but repayment is deferred until a later date.

A portion of the principal could be also be forgiven. This is optional on the part of the lender. There is no requirement for principal reduction or forgiveness, and there is no guarantee that your servicer will offer principal reduction or forgiveness

Can My Missed Payments Be Added Back Into My New Loan Modification?

Yes, the arrears can be added to the new loan balance and spread out over the term to allow the loan to be brought current.

Will My Mortgage Modification Include Property Taxes And Homeowners Insurance?

Yes. All loans modified under HAMP must include an escrow account for payment of future property taxes and hazard insurance, unless prohibited by state law. If your existing loan does not include an escrow account, one will be established. A new escrow account may require collection of a sufficient reserve to pay the taxes and insurance on or before they are next due.

The reserve amount cannot be added to the modified loan amount. The lender may give you the option of paying the reserve amount at the time the loan is modified or the option of spreading the amount over a period of 60 months and including it in the monthly escrow payment.

For the rest of this article please go to Loan Modification Under the HAMP Program, Part II

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All Things Loan Modification

Loan Modification: How It Works

Loan Modification Under HAMP, Part I

Loan Modification Under HAMP, Part II

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