Homeowners should contact their lender once they miss a mortgage payment, or, if at all possible, before moving past due. Doing so is the very first step to avoiding the life-altering effects and societal stigma . Sometimes, this call puts struggling homeowners on the road to participation in the government's Making Home Affordable application, which contains a mortgage modification component.
Unlike refinancing, where you transition into a new loan, mortgage modification adjusts the conditions of your current loan in an attempt to make the monthly payments more manageable. The federal government’s Residence Affordable Modification Program (HAMP) is available to all qualified homeowners, whose loans are serviced or backed by Fannie Mae or Freddie Mac. According to the Building Home Affordable site, despite the fact that there’s absolutely not any requirement that other servicers engage, the federal government”strongly” encourages them to do so.
The qualities of a HAMP modification change with each homeowner’s circumstances. To bring the down payment to an affordable amount, lenders often lower the rate of interest, at least briefly, on loans. The lowest rate, as of July 2010, is 2%. The end goal, notes the program’s site, is to bring a homeowner’s monthly mortgage down payment to no more than 31 percent of the gross monthly earnings. Additional choices to fulfill this number include extending the terms of the loan or forbearing or forgiving a portion of the mortgage balance.
HAMP eligibility is limited to owners of one- to four-unit possessions. The unpaid principal cannot exceed $729,750 on a one-unit home, $934,200 for 2 units, $1,129,250 for 3 units and $1,403,400 for four units. Furthermore, a HAMP applicant’s loan needs to have originated before January 2009, the monthly payment must exceed 31 percent of her monthly gross earnings, and the employer needs to be able to document financial hardship. Homeowners don’t have to worry behind on mortgage payments to apply if they”reasonably believe” they are just about to proceed past due, in accordance with Making Home Affordable.
When HAMP was released, the federal government estimated it would help 3 to 4 million strapped homeowners. That claim, as of July 2010, remains listed on the Building Home Affordable site. Daniel Indiviglio of the Atlantic takes this claim and HAMP to task. He asserts that a year into HAMP, the program has only completed 346,816 permanent modifications. Indiviglio asserts that lots of homeowners who enter a HAMP agreement will”re-default” due to the incidence of temporary rate of interest reductions.
The Office of the Comptroller of the Currency (OCC) issued a consumer advisory in April, 2009, warning homeowners of mortgage modification scams. In brief, the OCC contends that if it sounds too good to be true, it likely is. Scammers who offer to”rescue” homeowners from foreclosure or claim they are affiliated with the federal government are typical. The OCC suggests calling the federal government’s HOPE NOW Hotline (888-995-HOPE) in the very first sign of mortgage trouble and before responding to any loan modification provides.