Government Home Affordable Refinance program.

Another option for homeowners who are underwater or upside down on their home mortgage is the federal government’s Home Affordable Modification Program (HAMP). This is the option that homeowners will need to select if they not only have an underwater mortgage but if they have also missed payments on their mortgage. The Home Affordable Modification Program that is available through banks and mortgage lenders, such as Bank of America and Wells Fargo.

To qualify for assistance, the applicant needs to meet certain criteria. They need to demonstrate some type of financial hardship that puts your mortgage in imminent danger of default or foreclosure. In addition, the mortgage must be owned by Freddie Mac, Fannie Mae, or by other banks or lenders who have signed up with the U.S. Treasury to qualify for HAMP. Call your loan servicer to get information that will indicate whether it is participating or not.

Banks and lenders are encouraged to participate, as the HAMP program provides government incentives (of up to $1,500) to lenders to process these modifications on behalf of the homeowner. However, lenders are not required to over this assistance to people with an underwater mortgage, and the ultimate decision  rests with the lender.

Note that HAMP is not a refinancing program, but rather it is a change or modification to the mortgage  terms. It can lower your monthly payments for a period of up to 60 months. Or it can provide other types of modifications.

Starting in the sixth year after someone joins the Home Affordable Modification Program, a borrower's mortgage rate may begin to increase back to market rates. However the increase can be no more than 1 percentage point a year.

 

 

 

Banks and lenders that participate offer several different types of modifications to all homeowners, including those who are underwater on their home loan. The mortgage company could amortize your current mortgage to a longer term, they could forgive some of the principal balance, provide you with a lower interest rate, waive fees, or provide other help.  Call them and ask for information on the assistance they offer to people whose mortgage balance is underwater or upside down. In other words, it exceeds the current property value.

While a home loan modification may be a good option for many homeowners, there are strict qualification guidelines in order to be able to participate. As one example, the mortgage must be less than $729,750, the home must be a primary residence, the current monthly payment on your home mortgage must be more than 31 percent of your current gross income, and you must be able to demonstrate that you have a financial; hardship or that you are having difficulty making the monthly payments.

There is a trial period as part of HAMP, and the loan modification will come with a trial period of 90 days. After that period expires the lender reviews the borrower's situation to see if he or she qualifies for the long-term modification, which is a more permanent solution.