Saving Your Home From Foreclosure: The Home Affordable Modification Program (HAMP)

First introduced in March of 2009, the Home Affordable Modification Program (HAMP) is still available to eligible homeowners who are facing the threat of foreclosure. As a key component of the federal government’s Making Home Affordable Program, HAMP is a powerful tool for both delinquent and at-risk borrowers. The program authorizes a reduction of monthly payments to 31 percent of the borrower’s income, inclusive of property taxes and insurance, by encouraging lenders to participate with periodic cash payments. Servicers of some types of federally backed loans are required to solicit the participation of borrowers who are at least a month overdue.

HAMP is a possible option for mortgages originated on or prior to January 1, 2009, and the program is not set to expire until December 31, 2012. The eligibility of various mortgage types must also be considered to qualify for a modification under HAMP. Eligible mortgages include:

• First-lien mortgages owned, guaranteed or securitized by Freddie Mac for single-family primary residences of one to four units, including cooperatives, condos, eligible manufactured homes and conforming jumbo mortgages.
• VA, FHA and RHS guaranteed mortgages, subject to the guidelines of each of these agencies.
• Mortgages that were previously modified, unless they were already modified under HAMP.
• The unpaid principal balance must not exceed certain limits ($729,750 for a one-unit home).
• Mortgages for properties that are vacant, abandoned or condemned are not eligible.

Borrowers also must meet a range of eligibility requirements, including the following:

• The borrower must be facing financial hardship, including foreclosure, pending litigation involving the mortgage or an active bankruptcy application.
• Borrowers must be 60 days or more delinquent, but may be considered if they are current or less than 60 days delinquent and are also determined to be in imminent default. An adjustable rate mortgage (ARM) that is about to trigger a monthly payment increase is one example that could help a borrower qualify.
• Borrowers must currently have a monthly housing expense-to-income ratio greater than 31 percent of their verified gross monthly income.

An experienced debt relief attorney can help you understand whether HAMP or a host of other creative solutions can play a role in building a strong financial foundation going forward.