HAMP

Can the Federal Government Help Me Avoid Foreclosure?

If you are having trouble paying your mortgage or have fallen behind on your mortgage payments, the government’s Making Home Affordable program may have a way for you to avoid foreclosure. The Home Affordable Modification Program (HAMP) helps lenders to redefine your mortgage terms in your favor. You don’t even have to have a Fannie Mae or a Freddie Mac loan - borrowers with conventional mortgage loans can benefit from HAMP as well.

A loan modification is different than refinancing because there is no new loan. The terms of the existing first mortgage are simply changed. Under HAMP, the payment is temporarily reduced to 31 percent of the borrower’s gross monthly income. If a qualifying borrower can make that payment on time for a trial period of three or four months, a permanent loan modification will be arranged.

Eligible borrowers must either be delinquent in their mortgage payments or be able to show why they will soon be delinquent due to an upcoming change in financial circumstances. The current payments must be greater than 31 percent of their current or projected gross income. Owners of properties with four units or less may be eligible to apply for HAMP, as long as the borrower lives in one of the units. Their first mortgage must have been closed on or before January 1, 2009, and is the only lien which may be modified under HAMP.

Unlike other loan modification programs, there are no fees associated with participation in HAMP. Past-due mortgage payments and real estate taxes may be added to your modified mortgage principal, or they can be paid at the time of modification to avoid the mortgage interest that would accrue on them.

Lenders find loan modifications helpful because it is less expensive for them to work things out with you than foreclose on the property. They will require you to prove financial hardship, and they will ask for proof of your income and expenses all over again. Once the trial period has passed and they determine that you qualify for the program, they will work with either your interest rate or your payment term to find a monthly mortgage payment that works for you.

Not all lenders participate in HAMP, though, so ask your lender or click here to find out if your loan servicer will work with the program.

For more information on how HAMP can help you, visit the Making Home Affordable website. If you are not behind on your mortgage payments yet and you don’t have sufficient hardship to qualify for HAMP, see if you might be eligible for refinancing under the Home Affordable Refinance Program (HARP) instead.