Should I Apply For A HAMP Loan Modification?

Unless you’ve been living under a rock for the past year or so, I’m sure you’ve heard of President Obama’s Home Affordable Modification Program, or HAMP for short. The program provides incentives to participating servicers and lenders to modify mortgages at risk of foreclosure.

Should you apply for a loan modification under HAMP? The answer depends on your circumstances. The first question you need to answer is do you qualify?

To qualify for a HAMP mod, your mortgage must:

1: Be on your primary residence. No vacation homes or homes purchased for investment purposes
2: not exceed $729,750
3: must constitute a hardship
4: must have been obtained prior to January 2009
5: payment in excess of 31% of gross income

 

If you meet the criteria above then you may qualify for a HAMP modification and you should apply. I say "may" because servicers and lenders have the ultimate discretion about which loans they will modify and which loans they won’t. The reasons for this are beyond the scope of this article.

The next step is to gather the paperwork your servicer will require you to provide in order to verify your income and explain your hardship. Most lenders are using a uniform HAMP modification application package that will tell you, step by step, what you need, but you can also  get one directly from the government’s website: makinghomeaffordable.gov.  According to the government’s website, here are the steps:

Step 1 – Complete the Request Form (Request for Modification and Affidavit)

The Request Form provides information to your mortgage servicer about your home and financial situation. You can download an instruction guide for completing the Request Form here. After you have completed the form, print two copies—one for your records and one to send to your mortgage servicer.  All of the borrowers on the mortgage must sign the Request Form.

In this step, you are explaining the situation that has led to your current troubles with your mortgage. The form includes some general statements that you can check if they apply to your situation, such as loss of income, illness or other medical emergency, change in loan payments, etc. At the bottom, there is a blank section where you can explain your situation in greater detail. Really pour it on here and be very specific about how your hardship has made it impossible for you to continue paying on your mortgage .

 

Step 2 – Complete the Tax Authorization (IRS 4506T-EZ Form)

The Tax Form gives permission to your mortgage servicer to request a copy of the most recent tax return you have filed with the Internal Revenue Service (IRS). Click here for instructions on completing the form. After you have completed the form, print two copies—one for your records and one to send to your mortgage servicer.  Only one taxpayer is required to sign the Tax Form.

Form 4506T-EZ allows your lender to get a copy of your most recently filed tax return. Many people provide a copy of their tax return with their application, but whatever the case, you should fill out this short form and submit it with your package.

Step 3 – Gather Proof of Income

Your mortgage servicer is required to verify your income to ensure that the modified mortgage payments will be affordable for you.  The type of documentation you need to provide depends on the source of your income.  The simple Proof of Income Checklist will tell you what documents you need to collect if you are a wage earner, self-employed, or receive retirement income.  Be sure to make copies of your income documentation and keep the originals for your records.

Here, you are providing documentation for your income. What information you provide and how you provide it depends on whether you’re employed, self-employed, or retired/disabled.

  • For the employed, it is pretty simple:  a copy of your most recent two paystubs.
  • If you’re self-employed, then you need to provide a copy of your most recent quarterly or year to date profit and loss statement.
  • If you’re on social security or are receiving disability benefits, then you need a copy from the benefits provider stating the amount that you receive and the length of time you will receive those benefits and a copy of your two most recent bank statements showing that you’ve received those benefits.
  • If you want to submit proof of other income you receive, such as alimony payments, then you need to submit a copy of your divorce decree stating the amount you are receiving and how long you will be receiving it and two of your most recent bank statements showing receipt of those payments.

One important thing I should note here is that you should not over-document as this will only confuse matters for the servicer. These servicers really have no idea what they’re doing and submitting too much information only confuses the issue for them, which is why many loan modifications get wrongfully denied. I don’t know how many times people have been denied because of the some simple math error in computing income on the part of the servicer!

Once you have submitted your application, be prepared for a long waiting game and a fight. Servicers are loathe to modify most mortgages, even when it is clearly in the best interests of everyone, including themselves and the investor, to do so. Be prepared to send in multiple copies of the same documents. Keep copies of everything you submit and send it in a way that allows you to document when you’ve sent it, such as via express mail, certified mail, return receipt requested, and fax with fax confirmation receipts.

You will likely need to call for aid from your elected representatives. Write a letter to your congressional Representatives and to your Senators; write to your state Attorney General. These governmental officials are highly sensitive to homeowners struggling to make their payments and they can and will intercede for you. You may have to complain a number of times…remember, the old adage: the squeaky wheel gets the oil.

Advocate, advocate and advocate for yourself. There may be people who say that you’re not the only one out there struggling, but foreclosure is always personal, so fight for yourself and don’t let anyone dissuade you from doing so.

I’m curious…have any of my readers gotten a loan modification? If so, would you care to share your story ?

Help is also available from the following agencies:

NACA 

HUD

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6 Responses to “Should I Apply For A HAMP Loan Modification?”

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