Now is a good time to remember that the government’s Home Affordable Modification Program is slated to end on December 31, 2016. While this deadline may still seem far away, the HAMP application process can sometimes take longer than it should.
HAMP is the government’s largest loan modification program. In order to be eligible, you must have a hardship in affording your regular mortgage payments, the mortgage must have been obtained before January 1, 2009, and the total amount owed must be below $729,750 (for a single family home).
The main goal of HAMP is to reduce your total mortgage payment (including taxes, insurance, and association fees) to 31% of your gross monthly income. To do this, the interest rate can be reduced to as low as 2.00%, the payments can be extended for a new term of up to 40 years, and up to 30% of the total amount owed can be forgiven or delayed into a balloon payment due at maturity. A modification will also recapitalize the past due amounts so that the loan becomes current and foreclosure is avoided.
A separate HAMP Tier 2 program is available if a payment of 31% can’t be achieved under these terms. Tier 2 modifications generally offer less favorable terms but can be obtained on some mortgages not otherwise eligible for Tier 1 (such as investment properties, or mortgages with a prior HAMP modification).
HAMP was always intended to be a temporary program, though. While it’s possible that Congress could extend the ending date of December 31, 2016, that seems unlikely at this point. Therefore, if you are considering applying for a loan modification, please contact Brine Consumer Law as soon as possible for a free consultation.