Basics of the Home Affordable Modification Program (HAMP)

The Home Affordable Modification Program (HAMP) is a federal government mortgage assistance program created to help homeowners who can no longer keep up with their mortgage payments due to hardships such as unaffordable increases in expenses or reductions in income. The government goal for modifying your mortgage is to help you avoid foreclosure and keep your home by giving you a more affordable and sustainable monthly mortgage payment. If you qualify for a HAMP modification, you could save thousands with a lower interest rate and other more favorable loan terms.

Benefits of a HAMP Modification

Modifying your mortgage through HAMP has several substantial benefits making it, in our opinion, one of the best mortgage assistance programs available right now. The main benefits of a HAMP modification are:

1. Avoid Foreclosure. A HAMP modification helps you avoid foreclosure and stay in your home by resolving your delinquency and bringing your mortgage current again.

2. Resolve Your Delinquency. A HAMP modification resolves your mortgage delinquency and brings your mortgage current by taking the amount you are behind and adding it to the principal balance of your loan. Your monthly payment amount is then recalculated using your new interest rate and other loan terms applied as part of your HAMP modification.

3. Lower Mortgage Payment. With HAMP, your mortgage is modified to lower your monthly mortgage payment so that you pay no more than 31% of your gross monthly income.

4. Lower Interest Rate. HAMP interest rates start as low as 2% and never go above where the market rate was at the time you received your HAMP modification.

5. Fixed Interest Rate. If you currently have an adjustable interest rate, a HAMP modification will guarantee that your interest rate will never go higher than today's low rates, potentially saving you thousands over the life of your loan.

6. Principal Forgiveness. Under a HAMP modification, when you make your mortgage payments on time, you can earn up to $ 1,000 in principal forgiveness each year for the first 5 years. For simply honoring your commitment to pay, you could benefit from a total of $ 5,000 in principal forgiveness.

7. Rebuild Your Credit. A HAMP modification is much less damaging to your credit score than a foreclosure and resolves any existing mortgage delinquency so that your credit can start rebuilding immediately.

Eligibility Requirements for a HAMP Modification

HAMP is a completely voluntary program. HAMP provides financial incentives for your mortgage company to participate in HAMP; However, it is entirely up to your mortgage company whether or not they will offer you a HAMP modification. If your mortgage company does choose to participate in HAMP, it must adhere to strict guidelines set by the federal government, including homeowner eligibility requirements. In order to be eligible, you must meet the following criteria (keep in mind that these criteria may change from time to time):

1. Financial Hardship. You are experiencing a financial hardship that has caused you, or will soon cause you, to fall behind on your mortgage.

2. Amount Owed. The amount you owe on your mortgage must be less than or equal to:

• $ 729,750 for a single-family home;

• $ 934,200 for a 2-unit property;

• $ 1,129,250 for a 3-unit property; or

• $ 1,403,300 for a 4-unit property.

3. Eligible Loan. To be eligible, your loan must be backed by Fannie Mae or Freddie Mac, or serviced by a HAMP approved mortgage company.

4. Loan Origination Date. Your loan must have been originated on or before January 1, 2009.

If you're not eligible for HAMP, don't worry, there are several other mortgage assistance programs that you may qualify for.

How Do You Get a HAMP Modification?

To receive a HAMP modification, there is an application process similar to when you got your original mortgage. You will need to gather the required information, complete the application, and submit your request for mortgage assistance to your mortgage company. This is where you hear the horror stories from homeowners of hours spent on hold, trying to communicate through automated phone systems, endless requests for more documents, and trying to reconcile conflicting information from the various departments of your mortgage company.

We understand. Working with mortgage companies is a notoriously overwhelming, difficult, and confusing process. We have seen applications rejected for ridiculous reasons (like using the wrong color of ink). We have seen mortgage companies make blatant errors in reviewing applications. We have seen mortgage companies lose documents. In the worst case scenarios, these issues are never communicated from the mortgage company to the homeowner, the homeowner assumes their application is being reviewed, and the next thing they know they get a notice in the mail with a foreclosure sale date for their home.

You want this process completed quickly, and completed correctly. The longer the process takes, the more damage done to your credit, and the closer your home gets to foreclosure. As today's homeowners are all to aware, the consequences of your application for mortgage assistance being mishandled are ruined credit scores and foreclosed homes.

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