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Government Home Affordable Modification 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 is available through a number of 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 offer 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. The primary goal is to help make a home loan more affordable.

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. Those are just a few of the options that are offered to homeowners. 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. Read more on principal balance reductions.





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 in the Home Affordable Modification Program. 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.

Apply for Home Affordable Modification Program

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. So it is critical for the homeowner to stay on track with their payments during the trial period. To learn more, dial 888-995-4673. Or call an approved HUD certified housing counselor, and click here for a listing of non-profit HUD agencies by state.

Updates and revisions to HAMP

Studies have shown that the Home Affordable Modification Program was not as effective as the federal government would have liked. While tens of thousands of families have been assisted, the process has been too slow, not enough lenders actively participated, and too many borrowers just did not qualify. So changes were made to this program.

Several major improvements were made. The applicants debt to income levels was changed so that more people could qualify. Principal reductions were further encouraged, and banks and mortgage servicers will be provided additional compensation and encouragement to offer this to homeowners. Income limits were also tweaked. The end result is known as HAMP 2, and the results are show to be more effective. Learn more on how this new government mortgage assistance program can help you avoid a foreclosure.


By Jon McNamara


















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