HAMP applied by Jersey City Foreclosure Lawyer for loan modification

How does “HAMP” work to modify a mortgage?

As of December 31, 2017, HAMP and HARP are no more.

Updated: January 1, 2017

This program is no longer in effect.  If you still are being modified under this program, you may need to fight to keep your lender to honor this program.

If you are in NJ check to see if you qualify for the NJ Hardest hit Program. 

How does “HAMP” work to modify a mortgage in New Jersey?

HAMP stands for Home Affordable Modification Program. (This program was due to expire December 31,2015, but has been extended.) This is a government program designed to provide deep and meaningful savings for homeowners devastated by unaffordable increases in expenses or reductions in income.

To visit the government’s website, click here.http://www.makinghomeaffordable.gov

Many mortgage companies / servicers are required to participate in HAMP.  These include Bank of America, Chase, Wells Fargo, and many others. Click here for the complete list.

View the complete list and contact your mortgage company today. If your mortgage is owned, insured, or guaranteed by Fannie Mare, Freddie Mac, Federal Housing Administration (FHA), Veterans Affairs, or U.S. Department of Agriculture (USDA). We can ask your mortgage company which solutions will work best for you.

You may be eligible for HAMP if you meet the following criteria:

•You obtained your mortgage on or before January 1, 2009.

•You are unable to make your mortgage payments because of financial hardship.

•You are behind on your mortgage or in danger of falling behind.

•Your property has not been condemned.

•You owe up to $729,750 on your primary residence or one-to-four unit rental property (loan limits are higher for two- to four-unit properties).

•You have not been convicted in the last 10 years of a crime in related to a mortgage or real estate transaction.

What if I do not qualify for HAMP?

Even if you do not meet the above criteria, we can still work with you to get a loan modification in most cases.  If you meet the above criteria, applying for a loan modification under HAMP is something we can help you with.  Even if you do not qualify under HAMP, we can help secure loan modification or provide foreclosure defense in New Jersey or foreclosure defense in New York.  Many loan servicers have created in-house modification programs that often incorporate elements of the HAMP program itself even if you do not qualify under HAMP.

Under HAMP, there is a process called the “Standard Modification Waterfall,” which a set of steps that servicers must apply until the your Target Monthly Mortgage Payment is reduced to 31% of what your household makes. This includes all income from all sources, so if need be your son’s paper route and the rent from the first floor are considered as income.

The steps consist of Capitalization, Interest Rate Reduction, Term Extension and Principal forgiveness.

Capitalization is when the servicer must take all accrued interest, out-of-pocket escrow advances to third parties, mortgage insurance payments, and any required escrow advances that will be paid to third parties during the HAMP trial period and make them part of the loan. This increases the loan amount, but is used for the rest of the calculations.

A Monthly Mortgage payment with this value is calculated with the current interest rate, and duration.  If it is higher than the Target Monthly Mortgage Payment which was 31% of the household income the next step is taken..

The interest rate of the loan is dropped by 1/8 a percent or 0.125% and recalculated each time until the rate hits 2% or until the Target Monthly Mortgage Payment is reached.

If the loan still needs to be modified the term of the loan is extended up to a total of 480 months.  Some investors may not allow loan extension for various reasons, however this is something we would have to verify if it came to being denied in a loan modification agreement.

 If after the loan is extended, and the Target Monthly Mortgage Payment is still no reached, the next step is Principal Forbearance.  This makes part of the loan amount non-interest bearing and non-amortizing and results in a balloon payment a the end of the mortgage.  So, the payments would be paid for 40 years and at the end an amount would still be due to the servicer.

A servicer would not have to allow this to happen if the net present value of the loan is negative.

There are other factors that would also need to be considered.  Servicers may provide borrowers with more favorable modification terms than required by HAMP. Deviating from the Standard Waterfall must be noted in the mortgage file. These include an Interest rate does not increase after five years or is reduced to less than 2.0 percent or if additional principal forbearance is substituted for term extension.

There is also the Alternative Modification Waterfall where after capitalization the principal is reduced before going to the interest rate reduction step.  This has to do with the mark-to-market loan-to-value (MTMLTV).  MTMLTV compares what the house’s market value is to the amount of the loan.  So a home that is underwater where the loan is for more than the house is worth would have a MTMLTV greater than 100%.  So if house is worth 100,000, and has a loan for $150,000 the MTMLTV is 150%.  In this step the loan would be reduced until the MTMLTV is 115% or the  Target Monthly Mortgage Payment is reached.

For a more indepth explanation and examples of the waterfall in action go to:https://www.hmpadmin.com/portal/learningcenter/docs/presentations/mhaservicerwebinar02292012.pdf

The process of applying for a mortgage modification can be frustrating and confusing. If you are facing foreclosure and want help, we can examine your situation, and craft a strategy that is specific to you and based on your situation.  We cannot guarantee you will keep your home, or that even guarantee that we will find keeping your home in the long run is the best idea for you.

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