There are a number of rules regarding the HAMP program – many homeowners who are unemployed or under employed believe (incorrectly) that they do not qualify for HAMP programs.
Who is eligible for principal reduction?
The revised HAMP principal reduction program is designed specifically for the approximately four million U.S. homeowners who are responsible borrowers with reasonable mortgages. It does not offer protection for people holding million-dollar mortgages, speculators, and owners of vacation homes. It is recognized that some foreclosures are inevitable for those who simply bought a more expensive house than they could afford. Homeowners who intend to apply for a HAMP loan modification must meet several qualifications:
• You must be able to demonstrate financial hardship
• You must live in the home
• The home must consist of no more than four units
• Your mortgage balance must be less than $729,750 for a one-unit home. If the home has more than one unit, this cutoff amount increases
• You must have taken out your first-lien mortgage on or before January 1, 2009
• Your monthly mortgage payments must be greater than thirty-one percent of your income
• The home must be worth at least fifteen percent less than the amount of your first mortgage
Unemployed homeowners
Unemployed homeowners may qualify to have their monthly mortgage payments reduced or eliminated for three to six months while they look for work. To qualify they must:
• Submit proof that they are receiving state unemployment insurance benefits
• Within the first ninety days of mortgage delinquency the homeowner must request temporary assistance
• Meet HAMP eligibility guidelines, including being under the loan balance maximum and the owner occupying the house.
Qualifying for a HAMP program while on unemployment means that the homeowner may be able to get their home loan payment down to 31% of their income. Federal Unemployment maximums are around $2,000, meaning that the new loan payment could, in theory, drop to $620 per month.
When the temporary assistance period ends, homeowners whose mortgage payment is more than thirty-one percent of their monthly income and have found employment are eligible for a HAMP loan modification. The modified loan must pass a net present value test, and the homeowner must verify qualifying income and be up to date on their forbearance plan payments.
Bankruptcy
If the borrower or the borrower’s bankruptcy counsel asks for help, the new guidance requires servicers to consider a borrower in bankruptcy for HAMP principal reduction.
What should homeowners do?
If you believe that you qualify for a HAMP loan modification because your primary residence is worth less than your mortgage and you are experiencing financial hardship, contact your lender immediately. You should be aware that lender participation is voluntary; except for servicers of loans owned or guaranteed by Fannie Mae and Freddie Mac, your lender is not required to participate. If you are not sure if your loan servicer is a participant, check the federal government list at makinghomeaffordable.com/contact_servicer.html. If your lender or servicer is not part of the program, ask them about other options that may be available.
For more updated information on principal reductions, check out the latest on the mortgage relief project.
