Posts Tagged ‘home affordable modification program’

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

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New Enhancements To The HAMP Program Potentially Could Mean A Speedier Evaluation Process

In the past year and a bit since the inception of the Home Affordable Modification Program (HAMP), it has gone through a number of enhancements. The latest enhancements, which were announced back in January of this year, have now gone into effect as of June 1st.

Those enhancements detailed in Supplemental Directive 10-01, should help to speed up the process in evaluating borrowers for loan modifications and converting trial modifications to permanent ones.

One of  HAMP’s major obstacles has been  a poor conversion rate  from trial modifications to permanent ones.  Whether the servicers are to be believed and the fault lies with borrowers for not sending in the necessary income documentation, or it’s the servicers’ fault for losing that  paperwork,  the result  has been the same:  most trial modifications end up being denied or  are in limbo for months and months.  Under the new directive, servicers can only offer trial modifications based upon verified income:

Effective for all trial period plans with effective dates on or after June 1, 2010, a servicer may evaluate a borrower for HAMP only after the servicer receives the following documents, subsequently referred to as the “Initial Package”. The Initial Package includes:

  • Request for Modification and Affidavit (RMA) Form,
  • IRS Form 4506-T or 4506T-EZ, and
  • Evidence of Income

In other words, any trials offered will be based on income and other information already received by the servicer.   Conceivably, this means  that once a borrower is in a trial modification, barring any large change in the borrower’s income, that borrower should end up with a permanent HAMP modification if he makes all his payments on time.

The new directive also places some requirements for servicer communication with borrowers while under review for a HAMP mod:

Within 10 business days following receipt of an Initial Package, the servicer must acknowledge in writing the borrower’s request for HAMP participation by sending the borrower confirmation that the Initial Package was received, and a description of the servicer’s evaluation process and timeline.

and

Within 30 calendar days from the date an Initial Package is received, the servicer must review the documentation provided by the borrower for completeness. If the documentation is incomplete, the servicer must send the borrower an Incomplete Information Notice in accordance with the guidance set forth in the “Incomplete Information Notice” section below. If the borrower’s documentation is complete, the servicer must either:

  • Send the borrower a Trial Period Plan Notice; or
  • Make a determination that the borrower is not eligible for HAMP and communicate this determination to the borrower in accordance with the Borrower Notice guidance provided in Supplemental Directive 09-08.

Time will tell how well these enhancements to the program work. The major stumbling block to the success of the program remains its voluntary nature and the lack of enforcement ability to actually compel servicers to modify eligible loans and to cease foreclosures during the evaluation period.

HAMP Loan Modification Program Results Continue To Be Underwhelming

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The Treasury released its latest set of numbers today for the Home Affordable Modification Program (HAMP) through April, 2010.  According to the Treasury, 300,000 American homeowners have received permanent loan modifications under HAMP. This number has grown in recent months and that is good news. However, in light of the fact that foreclosures have continued at a rate that exceeds 300,000 for the 14th month and counting, the number of homeowners who have received help remains miniscule when compared to the number of homeowners who have lost their homes.

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