Eligibility Guidelines for the Mortgage Modification Program

The federal government provides the House Affordable Modification Program (HAMP) to homeowners struggling to fulfill their mortgage liability. Since Nick Timiraos of this”Wall Street Journal” clarifies, HAMP has not lived up to expectations. While the White House estimated HAMP would help 3 million to 4 million borrowers, lenders have granted just 1.3 million test alterations. As of July 2010, 41 percent of those homeowners fell from the program. Lenders look at several factors to determine.

Lender Status

If a creditor services a loan guaranteed by Fannie Mae or Freddie Mac, they Must participate in HAMP, based on the Making Home Affordable. It’s the very first step toward receiving a modification, although this does not guarantee eligibility. While the federal government does not require different lenders to get involved in HAMP, it offers incentives to people who complete HAMP alterations. A Making Home Affordable report notes , because of summer 2010, many major loan servicers participate, including big banks.

Property and Mortgage Factors

To qualify for HAMPa homeowner should personally occupy a one- to four-unit home. The remaining principal balance on a one-unit property can’t exceed $729,750. That number climbs to $934,200 for two components, $1,129,250 for 3 components and $1,403,400 for four components. Only first mortgages, originated on or before Jan. 1, 2009, are entitled.

Financial Hardship

Borrowers need to file financial hardship to qualify for HAMP. A homeowner has to be committing more than 31 percent of the yearly pre-tax income to his mortgage payment. The objective of HAMP is to alter mortgages to bring monthly obligations to or below the 31 percent affordability threshold. Lenders require that homeowners seeking HAMP alterations confirm their assets, income and expenses to show that they are struggling to make their mortgage payment. The HAMP guidelines state that, originally, a creditor may accept verbal informationnonetheless, before a lender approves a final alteration, written documentation is required. Depending on the phase of the process, homeowners facing foreclosure might be qualified for HAMP. HAMP suggests that homeowners get in touch with their creditor for guidance or a housing counselor. Unemployed borrowers are also qualified. In this scenario, a unemployed individual enters a particular Making Home Affordable program that features mortgage payment assistance prior to the chance of HAMP registration.

Trial Period

Once eligibility is verified, homeowners enter a three-month HAMP trial period. To be qualified for a permanent modification, HAMP clarifies a borrower should make three consecutive obligations through the trial period and confirm her income and expense data. If these pieces fall into place, the lender and homeowner signal an official modification agreement.

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