Many homeowners pay their mortgages on time but are not able to refinance to take advantage of today’s lower mortgage rates perhaps due to a decrease in the value of their home. President Obama introduced the Home Affordable Modification Program (HAMP) in February 2009 to stabilize the housing market and help struggling homeowners get relief and avoid foreclosure. HAMP provides eligible homeowners the ability to modify their mortgages to make them more affordable.
The government just recently announced that mortgage lenders would now have an expanded flexibility to assist more unemployed homeowners and homeowners who are underwater on their property through the program. A Home Affordable Refinance will help borrowers whose loans are held by Fannie Mae or Freddie Mac refinance into a more affordable mortgage. To qualify for a modification under the Home Affordable Modification Program (HAMP), you must meet the following criteria:
- Be the owner/occupant of a 1-4 unit property.
- Have an unpaid balance that is equal to or less than:
- $729,750 for a one unit property
- $934,200 for a two unit property
- $1,129,250 for a three unit property
- $1,403,400 for a four unit property
- The first lien mortgage originated on or before January 1, 2009.
- Your monthly mortgage payment is at least 31% of your monthly pre-taxed income.
- You cannot afford to pay your mortgage due to a financial hardship that can be documented.
Besides these qualifications, there are a few other things that applicants should know prior to applying to HAMP:
Debt-to-Income Guidelines: In order to qualify, a borrowers debt-to-income (DTI) ratio has to be anywhere in the range 32% to 70%. If your DTI is less than 31%, you probably wouldn’t qualify for a HAMP loan modification plan as there is little capacity for any adjustments.
Excess Monthly Cash Flow Guidelines: Under HAMP rules, the surplus or deficit, which may arise from the difference between the borrower’s monthly income and expenses, cannot exceed 10% of gross monthly income. In other words, if you have extra cash coming in, you must to disclose it, and this may affect your qualification for the program.
The Net Present Value Test: HAMP rules and regulations require mortgage lenders to carry out a “Net Present Value Test” (NPV test). This involves calculations on their current home loan to determine how feasible loan modification is for the borrower. If your current home mortgage loan fails the NPV test, don’t give up. There are chances you could pass the NPV test with some minor corrections in your financial statement.
Do you think you qualify for HAMP? Contact me today. I offer a free consultation for all new clients. I can explain with all of the HAMP loan modification filing procedures.