Are you struggling to make ends meet?
Around 40 million Americans live in housing they can’t afford, and many are unable to make their mortgage repayments.
If you are one of them, the Home Affordable Modification Program may be able to help you.
This government initiative reduces your payments and extends the term of your mortgage, bringing your expenses down to a level you can afford. For some families, it’s a lifesaver.
In this article, we’ll explain what it’s all about. Read on to find out everything you need to know about the HAMP program.
The HAMP Program Explained
If you’ve fallen behind on your mortgage payments, HAMP could enable you to take back control. Here’s how it could help you.
1. You Need to Meet Certain Criteria to be Eligible
HAMP isn’t for just anyone. In order the be eligible for the program, you need to meet the following criteria:
- A mortgage on a property that has not been condemned
- A mortgage obtained before January 1st, 2009.
- Total lending amounts not exceeding $729,750 on residential or rental properties (unless this includes two-unit or four-unit housing)
- Able to demonstrate financial hardship that makes it difficult or impossible to make regular mortgage payments.
You may also be eligible if the amount you owe on your mortgage is more than the property is currently worth.
Eligibility is given on a case-by-case basis.
However, if you fulfil all or most of these requirements and HAMP guidelines, you are likely to be accepted. Then you’ll be able to make adjustments to your mortgage payments.
2. You Need to Provide Evidence When You Apply
Being eligible isn’t good enough on its own. You need to be able to provide hard evidence to demonstrate your financial situation. This will support your application and prove that your situation is exactly as you claim.
This evidence usually includes documents such as mortgage statements, as well as proof of expenses or debts that need to be paid off each month. If you have tuition fees, student loan repayments, car payments, alimony, credit card bills, or any other payments that need to be made every month, you can include these.
You’ll also need to provide proof of income. You can do this with pay stubs and bank statements. Your mortgage company will use these documents to compare your income with your expenses, making an informed decision about your financial situation.
Your lender can provide you with a definitive list of all the documentation you need to apply.
As well as providing this documentation, you may also need to explain your needs during a consultation. This is a face-to-face meeting in which your mortgage lender will go over your application, ask you questions and discuss your options.
3. There is a Trial Period
Once you are deemed to be eligible for the program, your mortgage provider will usually start by putting you on a three-month trial plan.
During this period, you will have to demonstrate your ability to make regular payments at the revised level. If you make all of your payments on time, they will then sign an official modification agreement to make the adjustments long-term.
If not, the agreement will be terminated. Then, you’ll have to seek out other options.
4. You Could Save Hundreds Every Month
Once you start on the HAMP program, your mortgage lender will work with you to reduce your monthly payments as much as possible.
On top of that, interest rates will be reduced and fixed, and terms will be extended. This takes the strain off you and your bank account, making everything easier to manage.
Specific savings will vary from case to case, depending on each person’s financial situation. However, the majority of homeowners can save hundreds of dollars every month using this program.
If you make all your payments on time, you may also qualify for incentives. This allows you to save even more. The opportunity for savings is huge!
Once an affordable figure is set for your payments, you will continue to make payments at this rate either until your mortgage is paid off or you sell your home.
5. You Need to Keep Your Account in Good Standing
After you’ve started HAMP, you’re subject to various rules and regulations.
In order to remain on the program, you’re obligated to keep your account in good standing. This means that you must make regular payments on your mortgage, either at the minimum rate you were given or more than that figure.
If you fail to do so, you will no longer be eligible for some of the benefits the HAMP program provides. If you miss multiple payments or fail to make one for more than 90 days, you may be struck from the program altogether.
6. You Can Apply More than Once
If you have previously been denied for the HAMP program, all is not lost. You can still apply again.
This is also the case if you’ve already been approved before and suffered another financial hardship.
7. It’s Designed to Stave Off Foreclosure
In the past, the only way to put off or stop a foreclosure was to refinance your mortgage. HAMP changed that.
The Treasury Department created it under President Obama as part of an initiative called Making Home Affordable.
The purpose of the program is to help homeowners avoid foreclosure by modifying their mortgages, lowering payments to an affordable rate.
When you start HAMP, your delinquency status will be resolved, and you will no longer be at the risk of foreclosure. While foreclosure would have been a huge threat to your credit score, HAMP isn’t. This makes it much more likely that you’ll be able to secure another mortgage in the future.
This means that when Americans are in financial crisis, they have a lifeline. This is especially valuable to those who are unexpectedly hit by illness or job loss, which drastically decreases their income and threatens their ability to make mortgage payments.
When you’re already experiencing financial hardship, the looming threat of losing your home through foreclosure is incredibly daunting. HAMP eliminates this threat altogether.
8. It’s Not Risk-Free
Despite its benefits, using HAMP mortgage modification doesn’t guarantee you financial safety.
Some people find themselves later re-defaulting or going through foreclosure later down the line. Others end up paying far more in interest due to extended mortgage terms.
In order to avoid this, you’ll have to stick to the requirements you agreed upon at the start. It’s your responsibility to continue making payments at the reduced rate. Otherwise, you are still at risk of losing your home.
9. There are Two Tiers
The HAMP program has two tiers.
When it began in 2009, there was only one. However, a second tier was introduced in 2012. This allowed people who were not eligible under the original requirements to apply for the program.
Here are the modifications which are made to mortgages under each tier.
HAMP Tier One
- A 95.8% reduction in interest rates
- Term extension of 59.7%
- Principal forbearance of 30.9%
- Mortgage payments reduced to 31% of monthly income
HAMP Tier Two
- A 71.3% reduction in interest rates
- Term extension of 82.1%
- Principal forbearance of 32.2%
- Available to Non-Government Sponsored Enterprise Mortgages only
Tier 2 provided an extra option for those who had previously been accepted for HAMP, but defaulted on their payments and lost their benefits. It also allowed homeowners who wanted to modify mortgages on rental properties to participate in the program.
10. It’s Not the Only Option
HAMP isn’t the only way to make your mortgage more affordable. There are other options available, too.
One of these is the HARP (Home Affordable Refinance Program). This could allow you to get a lower interest rate, reduce the loan term of your mortgage, or change your adjustable rate to a fixed one. It’s currently available through 2018.
Some homeowners may be able to reduce their monthly mortgage payments through other government-affiliated lending programs.
As another solution, some mortgage lenders will allow you to refinance your home. Others don’t participate in HAMP at all, and instead, choose to offer other ways to amend mortgages.
11. It Has Been Extended Several Times
Since being introduced in 2009, HAMP has been extended multiple times.
First, it was expanded in 2012 to offer a second tier. Then, it was extended in 2013 through to 2015.
Due to the success of the program, it continued for several years. In 2017, a further 15 months were added to the current timeline, making it available until December 31, 2018.
Mortgages Made Easy
Mortgages can be huge financial burdens. Many homeowners find themselves looking for ways to get out of these contracts to resolve a financial crisis. The HAMP program is one way to do this.
At ASAP Cash Home Buyers, we are experts in this field. We can help you to sell your house as soon as possible without losing money. This means you can be free of your mortgage and move onto your next venture.
With our guidance, you easily sell your property and turn your finances around for the better. Then, you’ll be off to a fresh start.
Contact us to see what we can do for you.