Making Sense of Making Homes Affordable Program, Part 3 of 4
Do you qualify for HAMP?
The Making Homes Affordable program has two parts – the Home Affordable Refinance Program (HARP), which we talked about in a previous post, and the Home Affordable Modification Program (HAMP), which we’ll dig into here.
For 99% of Southern California homeowners facing foreclosure, we believe the HAMP is a better solution over HARP. A loan modification is beneficial when it doesn’t make sense to sell, which is the case for many Southern Californians because of rapidly declining home values.
Under HAMP, eligible homeowners are given two to three months to make lower home loan payments and if all goes well, the new loan with lower interest rates will take effect. After the fifth year, interest rates will increase and so will payments.
Pick the Best Loan Modification Program for You
There are modifications out there that secure a longer-term modification of 30 to 40 years. In other words, HAMP isn’t necessarily the best modification program.
What makes HAMP different from other modification programs is that the U.S. government is providing incentives to both the lender and the home owner to complete the modification. Essentially, the government is going out of its way to make sure three to four million home owners don’t go into foreclosure.
The problem is that many lenders aren’t providing modifications when they should. HAMP is a voluntary program, and truth be told, most lenders earn more from foreclosures and short sales than they do through a modification.
As of late there has been talk of homeowners completing a modification on your own. In our opinion, the do-it-yourself approach to home loan modifications is the same as representing yourself in the court of law. There is a certain expertise necessary.
Here are the basics for HAMP qualification:
- The modification you are seeking is for your primary residence
- You owe less than $729,750 on your first mortgage
- Your monthly home loan payments are more than 31% of your income
- You received your home loan prior to January 1, 2009
When struggling to make payments or when in search for a lower interest rate, the Making Homes Affordable Program is not the only option. If you aren’t eligible for HAMP or HARP or if you prefer not to go this route, consider another option such as a partial claim, which is a 12-month, interest free second mortgage for FHA home loans or a repayment plan offered by some lenders that allows you to repay delinquent payments interest free.
Next up in our Making Sense of Making Homes Affordable Program series, we’ll talk about the impact of the program on Southern California foreclosures. Sign up for our RSS to receive updates to your feed.
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