HAMP Calculator Helps Determine Modification Eligibility
The U.S. Treasury Department has developed an online calculator to assist homeowners in determining eligibility for assistance under the federal Home Affordable Modification Program. HAMP is a federally funded program that defines the process for borrowers who are in default, at risk of imminent default, or in foreclosure to modify their home mortgage to a more affordable monthly payment targeted at 31 percent of their monthly gross income. The HAMP calculator, found at CheckMyNPV.com, is designed to calculate the net present value (NPV) of their mortgage, and can be used by homeowners prior to applying for a HAMP modification with their lender. The NPV is a formula used to determine your eligibility for a loan modification under the HAMP Program. The Treasury Department cautions that the calculator “provides only an estimate of a servicer’s NPV evaluation and is intended for use only as a guide.”
Unveiling the calculator at CheckMyNPV.com is the latest move to streamline the HAMP process. It comes on the heels of an announcement by the Treasury Department to require that servicers designate a single point-of-contact through the entire default resolution process.
If you are behind on your mortgage payments, or can’t afford your current mortgage payment, you have options! In addition to the federal bankruptcy laws, HAMP is one of several government programs that are available to homeowners in distress. In some cases, bankruptcy can provide time for the homeowner to negotiate lower payments with the lender, repay mortgage arrears, or even strip away a second or third mortgage loan.
The housing bubble has burst, but that doesn’t mean the fallout must rain down all over you and your family. Protect your home by taking advantage of the legal processes in place to refinance, modify, or discharge your home debt. Speak with an experienced bankruptcy attorney and discuss your legal options.
Homeowners Have Options for Underwater Mortgages
If you are a homeowner who owes more money on your mortgage than your home is worth, there are a several options for saving your home. One of the latest is an $11 billion program through the Federal Housing Administration called “Short Refi.” Under this program a non-FHA borrower may be able to obtain a new FHA-insured mortgage.
To qualify for the Short Refi program, the homeowner must be current on the monthly mortgage payments. The new primary FHA-backed loan cannot exceed 97.75 percent of the value of the property; and the second mortgage cannot exceed 15 percent of the property value. Additionally, the lender must agree to write off at least 10 percent of the loan’s principal balance.
Fannie Mae and Freddie Mac loans do not qualify for the Short Refi program. The New York Times reports that 23 lenders have signed on to the Short Refi program and are offering refinancings. Notable non-participants are Bank of America, Citibank, and JP Morgan Chase.
There are several programs available to save an underwater mortgage, so the homeowner is not stuck with a “one-size-fits-all” refinancing dilemma. One federal refinance program that has seen some recent success is the Home Affordable Refinance Program (HAMP). Refinancing a mortgage under HAMP during bankruptcy is specifically authorized and can save the homeowner significant money when combined with a bankruptcy discharge. Additionally, debtors in Chapter 13 bankruptcy may be able to strip off a second or third mortgage if the loan is entirely unsecured. For instance, if the value of the home is $200,000, and the first mortgage is $200,000 or more, then any additional mortgage or lien on the property would be entirely unsecured and could be stripped off during Chapter 13 bankruptcy.
If your home is underwater and you are struggling with debt, speak with an experience bankruptcy attorney and discuss your options. In many cases you can discharge your unsecured debt through bankruptcy and refinance or modify your underwater home loan to new, affordable terms. Get the facts about rescuing your underwater mortgage today.
Mortgage Refinancing Can Be Full Of Surprises
Many homeowners participating in the federal “Making Home Affordable” program, a federal mortgage assistance program, have found that the program benefits have not lived up to the political promises. Homeowners have discovered that this refinance process is not only difficult, but in some cases can be destructive to their credit.
The Making Home Affordable program is a $75 billion dollar loan modification program aimed at helping homeowners refinance their mortgages to terms they can afford. The program is actually two refinance processes: first, a refinance program for homeowners with Fannie Mae and Freddie Mac loans; and second, a modification program for everyone else. The “everyone else” program is the “Home Affordable Modification Program” (HAMP). Under HAMP, homeowners who have experienced financial difficultly (e.g. a job loss or high medical bills) and are struggling with their current mortgage payments can reduce their mortgage payment by lowering their interest rate up to two percent and extending the repayment period up to 40 years.
While the promise of refinance sounds like a blessing, the process can be both slow-moving and full of unexpected surprises. For instance, to qualify under HAMP the homeowner must, among other requirements, make all mortgage payments on time for a three-month trial period. In essence, the program requires timely payments that you can’t afford before the loan can be modified to a payment you can afford!
Homeowners who seek assistance under HAMP are also surprised by an immediate reduction of their credit score during the three month repayment period. By applying for a home loan modification, you are announcing to the credit industry that you are experiencing financial difficulty. This can lower your credit score by up to a staggering 150 points, making it difficult to obtain other types of credit including auto loans. This initial drop can only be rectified over time.
If you are experiencing financial difficulty, educate yourself to all your legal options. Only an attorney can advise you regarding your legal options including bankruptcy, debt settlement options, and government assistance programs. An experienced bankruptcy attorney can help you evaluate your financial position and choose the right option for your family.
New Federal Guidelines Hope to Increase Home Modifications
In response to many criticisms of its Home Affordable Modification Program (HAMP), the Obama Administration recently announced significant changes intended to speed the modification process and clarify eligibility. Under the new guidelines, mortgage lenders must pursue early intervention to determine borrower eligibility under HAMP, and may not refer any loan to foreclosure until the borrower has been determined ineligible for the program. New timeframes have also been implemented and homeowners can expect a modification decision within 30 days.
The new HAMP guidelines require participating lenders to use principal reduction as a primary means of reducing borrowers’ payments where loans are more than 115 percent of the current home value. Borrowers that are current on their mortgages may qualify for refinancing at a low interest, fixed rate loan insured by the FHA, provided that the lender agrees to reduce the principal for the total combined debt to no more than 115 percent of the home’s value. This provision is meant to encourage lenders to reduce principle for those property owners with negative home equity.
Another important change is a clarification that debtors in bankruptcy must be considered for HAMP. A request for consideration for a modification while in bankruptcy may be made by the debtor, the debtor’s attorney, or by the bankruptcy trustee. This provides a yet another tool for the bankruptcy attorney to save a home mortgage from foreclosure and negotiate terms that the debtor can afford.
To qualify for a loan modification under HAMP, the borrower must:
- Be the owner-occupant of a one- to four-unit home;
- Have an unpaid principal balance that is equal to or less than $729,750 for a single-unit home (other limits apply for multi-unit homes);
- Have a first lien mortgage that was originated on or before January 1, 2009;
- Have a monthly mortgage payment (including taxes, insurance, and home owners association dues) greater than 31% of your monthly gross (pre-tax) income; and
- Have a mortgage payment that is not affordable due to a financial hardship that can be documented.
The combination of a bankruptcy and a HAMP loan modification may help some borrowers save their homes and stabilize their family finances. If you are in financial trouble, consult with an experienced bankruptcy attorney and discuss your options. Don’t be a victim of debt! Take control today.
Happy Holidays From Mortgage Lenders
The Associate Press is reporting that Citigroup Inc. will suspend foreclosures and evictions for 30 days. This moratorium will provide temporary relief for about 4,000 borrowers during the holiday season. Other lenders are expected to follow suit continuing a tradition that began last year for suspending foreclosures during the holiday season.
Thanks a lot.
A report release earlier this month by the U.S. Department of the Treasury indicates that many of the nation’s largest mortgage lenders are not doing enough to lower the numbers of home foreclosures. In one case the report found that after eight months of participating in the Home Affordable Modification Program (HAMP) Bank of America had registered a dismal 15 percent of the more than 1 million delinquent borrowers who are potentially eligible.
The HAMP, introduced in March 2009, provided guidelines for lenders to modify a home mortgage, such as capitalizing arrearages, extending a mortgage to 40 years and reducing the interest rate, until the payments get down to 31 percent of a borrower’s income.
One reason for the low numbers of loan modifications is that it is labor-intensive, according to John Rao, an attorney with the National Consumer Law Center. Mr. Rao testified to Congress earlier this year that lenders are not compensated for the labor-intensive process of a modification, whereas they are compensated for the extra work in foreclosing on a home. In other words, there is no real incentive to help the homeowner. Some lenders have delayed the loan modification process until the homeowner is forced to file bankruptcy and then add thousands of dollars in interest and costs to their home loans.
For homeowners that would benefit from a loan modification and a chapter 7 bankruptcy, lenders are especially reluctant to give permanent loan modifications, often offering interim loan modifications that last only two to three months. If the homeowner files for bankruptcy, the lender will often withdraw any workout plan leaving the homeowners further in debt.
The road to saving your home and easing your monthly debt obligation can be a perilous journey. It is best to use an experienced bankruptcy attorney to guide you through this difficult path. Until Congress decides to offer an effective program that offers real relief, bankruptcy can be a powerful option for saving your family’s home.