Making Home Affordable Program
For loans entered into after January 1, 2009, the federal government implemented a refinance option and a modification option to help homeowners avoid the foreclosure of their homes. Servicers must voluntarily participate in the program but once signed up are bound by the contracts with the Treasury Department. See makinghomeaffordable.gov for more information.
Are you interested in:
Refinance
Modification
Short Sale or Deed in Lieu of Foreclosure
Refinance Option
Only available to homeowners with Fannie or Freddie owned loans. You must be current on your mortgage to qualify, which means the homeowner has not been more than 30 days late in the last 12 months. The current loan to value ratio must be more than 80%. Second mortgages do not necessarily negatively impact eligibility. The homeowners income must be sufficient to pay the new mortgage. The refinance must improve the long term affordability of the loan so it is possible to see monthly payments increase as long as the homeowner can afford the loan over the long term. Homeowners will not be able to reduce the principal balance and will not be able to get cash to pay off other debts.
Check to see if a Fannie or Freddie owned loan:
Fannie: www.fanniemae.com/loanlookup
Freddie: www.freddiemac.com/mymortgage
Modification Option
The modification option additionally applies to Fannie and Freddie owned loans but also applies to servicers choosing to opt into the program – many servicers and lenders have agreed to participate including Bank of America, Wells Fargo, and Countrywide. In order to be eligible, the homeowner must:
- Be an owner-occupier in a 1-4 unit property (live in the home)
- Have an unpaid principal balance that is less than $729,750
- Loan must have been originated on or before January 1, 2009
- Mortgage payment is more than 31% of gross income
- Mortgage payment is not currently affordable
The homeowner must also have a verifiable and documented hardship. If you have previously recieved a HAMP modification, you will not be eligible to receive another loan modification.
Second mortgages do not defeat eligibility and there is now also a program for homeowners to modify second mortgages under the Making Home Affordable program.
Modification does not cost anything for the borrower, and the borrower and servicer both offered financial incentives to modify. The overarching goal of the program is to get the interest rate low enough so that homeowners are not required to pay more than 31% of their income on their mortgage.
Servicers can put homeowners on a 3 month trial period to see if the interest rate reduction results in a truly affordable mortgage.
Servicers then may execute a permanent modification agreement to fix interest rate for 5 years.
After 5 years the rate may increase if the interest rate is below current market rate but the maximum interest rate will be capped at the prevailing market interest rate as published by Freddie Mac on the date the modification agreement is executed.
Escrow for taxes and insurance is mandatory.
If an interest rate reduction will not bring the payments low enough (min interest rate set at 2%), servicers may extend payment terms to 40 years or forebear principal (with balloon payment) and investors may forgive principal (no mandatory forgiveness requirement).
Common questions related to the Making Home Affordable Program:
When should I contact my lender/servicer to request help?
What type of loans must be reviewed for HAMP?
I contacted my servicer but was told the lender/investor does not participate in HAMP. What does this mean?
I am current with my mortgage payments and I fit all the initial requirements for HAMP. Would I qualify for HAMP?
I applied for HAMP and received a Non-Approval Notice due to a Negative Ne Present Vlue (NPV) Test. What does this mean?
I am currently unemployed. Will I qualify for HAMP?
What happens if I am approved for HAMP?
Are there any options for my second mortgage?
Are there any options when someone can't keep the home or the loan modification is denied?
When should I contact my lender/servicer to request help?
A homeowner should contact the lender/servicer as soon as they believe they will have trouble paying the mortgage, even if they are still current.
What type of loans must be reviewed for HAMP?
Fannie Mae and Freddie Mac loans must be reviewed for HAMP. See above to find out of Fannie Mae or Freddie Mac guarantees or owns your loan. Any lender that has signed a "Servicer Participation Agreement" also has to review the loan for eligiblity for HAMP when requested. You can find out what servicers have signed the agreement by looging in to the Making Home Affordable website.
I contacted my servicer but was told the lender/investor does not participate in HAMP. What does this mean?
A servicing company may or may not be the same as the lender. A lender/investor can contract with a servicer to collect payments from a homeowner. So, even though the servicer is listed as a participant in the Making Home Affordable Program, they are not your lender and ultimately does not make the decision about participation in the Making Home Affordable Program. Even if you find out that your investor is not participating in HAMP, you should still discuss loss mitigation options with them as there might be other alternatives to enter into a loan modification.
I am current with my mortgage payments and I fit all the initial requirements for HAMP. Would I qualify for HAMP?
Homeowners do not have to be currently in default to qualify for HAMP. However, homeowners must be at "imminent risk of default". Imminent risk of default is not defined by the Making Home Affordable Program and is instead left to the individual servicer to define. Some servicers may use a Net Present Value Test to determine the risk of imminent default. Others will review any assets you have and will use that to determine how long you may have before you would potentially default. Other services define imminent default by the hardship and will only consider the death of a borrower, co-borrower, or responsible family member, divorce or legal separation of the borrower, or the onset of a disability.
I applied for HAMP and received a Non-Approval Notice due to a Negative Ne Present Vlue (NPV) Test. What does this mean?
A net present value test is ued by servicers to determine if the mortgage may be eligible for HAMP. You can visit www.checkmynpv.com and enter your information along with the list of NPV inputs from the non-approval notice. The information used for this online test is similar but not exactly the same as used by the servicer and can give you a better idea of why youdid not qualify for HAMP. If incorrect or outdated data was used in the NPV test, you can contact the servicer with the new or corrcted data and ask them to re-run the NPV test.
I am currently unemployed. Will I qualify for HAMP?
No. However, you may qualify for the Unemployment Program through the Making Home Affordable Program. The unemployment program is a forbearance agreement that allows a lender to reduce a homeowner's payment to at least 31% of their gross monthly income or can be suspended completely for the full duration of the plan. The plan must be for at least 3 months in duration and can be extended by the servicer. You must not have previously received a loan modification under HAMP. Once you complete the unemployment program, and have secured employment, you may then apply for a HAMP modification.
What happens if I am approved for HAMP?
You will get a letter from your servicer stating you have been approved for a HAMP 3 month trail plan. This letter will outline your next 3 payments and their due dates. There is no grace period durning the trial plan. **If your payment is late, you are automatically removed from HAMP and will be unable to apply for HAMP again.** Once all 3 payments are submitted on time, the lender may require additional documentation to prove your financial hardship still exists and verify your financial information. Once the servicer reviews the new information and determines you are still in need of a modification, the servicer will send you a permanent loan mofication agreement. This can take an average of 90-120 days after you complete your trial plan. **It is important that you continue making your trial plan payments while waiting on the permanent loan modification.**
Are there any options for my second mortgage?
The Making Home Affordable Program has a Second Lien Modification Program (2MP) which applies only when the first mortgage was permanently modified under HAMP. The same basic HAMP eligibility criteria apply. The servicer on the second mortgage does not have to be the same as the first, but must also be participating in the Making Home Affordable Program. The terms of the second lien modification will coincide with the modified first mortgage. Also, some servicers may decide to "extinguish" or cancel a second lien instead of entering into a modification. The servicer receives an incentive if the second lien is extinguished.
Home Affordable Foreclosure Alternatives (HAFA)
Are there any options when someone can't keep the home or the loan modification is denied?
The Home Affordable Foreclosure Alternatives (HAFA) program is meant for homeowners meeting the initial eligibility criteria but do not ultimately qualify for a HAMP trial plan, do not successfully complete a trial plan, or are delinquent on a HAMP permanent modification by missing at least 2 consecutive payments. HAFA offers short sale and deed in lieu of foreclosure options. You must contact your lender to apply for HAFA. Most lenders will require you attempt a short sale before allowing a deed in lieu of foreclosure. Homeowners may also obtain $3,000 in relocation funds.
A short sale is an agreement with your servicer to sell the home for less than the amount still due on your mortgage. In the HAFA program, your servicer will enter into a short sale agreement with you and tell you up front what price they are will to accept when you sell your home. In a regular short sale, you will generally need to send the offer you receive to your lender to see if that price will be accepted. If you are interested in a short sale, it will be in your best interest to contact a licensed Realtor and is a requirement for the HAFA program.
A deed in lieu of foreclosure is an agreement with your lender to essentially take back the house without going through the foreclosure process. You will need to provide clear title in order to apply for a deed in lieu of foreclosure. In both the short sale and deed in lieu of foreclosure contexts, you will have what is called a deficiency balance. This is the amount of the loan left over after the home is sold or deeded to the lender. Under the HAFA program, your lender is required to waive the deficiency balance. If you are not under the HAFA program, you or your Realtor will need to ask the lender to waive the deficiency. **Please be aware this may have tax consequences for you.
NOTE: The information contained on this page is for general background information only. If you have a legal question, it is best to consult with an attorney.
