What Is the Home Affordable Modification Program?

The Home Affordable Modification Program was set up by the U.S. government to help homeowners facing foreclosure get loan modifications from their lenders. The program was supposed to prevent millions of foreclosures, but has fallen far short of that goal.

Eligibility for the Home Affordable Modification Program

In order to quality for HAMP, borrowers must have mortgages that were initiated no later than Jan. 1, 2009. The amount owed on the home cannot exceed $729,750 for a single-family home, and the mortgage being modified must be a first mortgage.

There are also income requirements for getting a modification through the Home Affordable Modification Program. Applicants must document their income and provide an affidavit stating that they are facing financial hardship. If the total amount of the homeowner’s mortgage payment plus taxes and insurance does not exceed 31% of their income, they will not qualify for HAMP.

The Home Affordable Modification Program remains in effect through the end of 2012, so if you are in need of a loan modification, there is still time to apply.

Lenders are supposed to review the applications and attempt to modify the loans so that the total monthly payment comes to not more than 31% of the borrowers’ income. This amount includes insurance and property taxes on the residence.

There is an order in which lenders are supposed to consider modifications. Reducing the interest rate is first, followed by increasing the term of the loan. If neither of those will work, the lender is expected to either reduce the principal amount or hold off on collecting some of it.

It Is Hard to Get a Modification through HAMP

Like many well-intentioned government programs, the Home Affordable Modification Program has problems. So far, only around 500,000 loan modifications have been made through the program. Compared to the millions that were promised, this is a huge letdown.

Many homeowners have complained about getting the runaround from their lenders or being strung along, only to be rejected after multiple applications and re-submissions of paperwork that was “misplaced” by the lender.

If you apply for the Home Affordable Modification Program, make sure you have a backup plan in case your application is not approved.

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