What Is HAMP?

Learning The Basics Of The Home Affordable Modification Plan

By: - Mortgage - November 21, 2011
what is hamp learning the basics of the home affordable modification plan

If you have been paying attention to the news and economy over the past few years, you probably know that there is a mortgage crisis going on in the United States. Millions of homeowners have lost their homes during this current economic downturn and many more are still at risk of doing so. One of the ways that the Obama administration has introduced in order to help these families save their homes is a program through the US Departments of the Treasury Housing and Urban Development called HAMP.

“What is HAMP?” you may be asking. HAMP stands for “Home Affordable Modification Plan” and is part of a huge and involved strategy that is supposed to get the economy and housing market back to where it was several years ago. The “Home Affordable Modification Plan” is just one piece of the “Making Home Affordable Program” which is the whole plan in order to help those who are experiencing difficulty with their mortgage payments.

When you ask “What is HAMP?” you probably mean “How can HAMP help me?”  If you are a homeowner who is behind on your mortgage payments, HAMP may be the perfect solution for you. What HAMP does is offers help you homeowners who struggle with their mortgage payments. The government basically offers mortgage companies an incentive if they modify your existing agreement. If you are eligible for this “Home Affordable Modification Plan”, you can get your mortgage payments as low as 31% of your pre-tax income.

Now that you know the answer to “What is HAMP?” you may want to know if you are eligible for it. The only way you can know for sure if you are eligible for the HAMP program is to speak directly to your mortgage lender, however, there are some guidelines you can look at to determine if you may be eligible. There is a great questionnaire you can take right on the office site for HAMP at http://www.makinghomeaffordable.gov. Looking at theses eligibility requirements a bit closer can give you an idea on if you may be able to get this assistance.

The first requirement for HAMP is that the dwelling you have the mortgage on has to be your primary residence and you have to owe less than $729,750 on the remainder of the payments. You must be having problems paying your mortgage as well. This includes a significant increase in your mortgage payment, a decrease in your income not due to unemployment or a hardship such as medical bills. You will be eligible if you have already fallen behind or if you are in danger of falling behind. In addition to those requirements, you must have gotten your mortgage before January 1, 2009 and your current payment must be more than 31% of your pre-tax income.

If you meet all of the above, you may very well be eligible for the HAMP program and you should consider contacting your mortgage company. If you are eligible and approved, you will be put on a trial run, so to speak, and have a chance to try out the program. As mentioned above, you will have your payment set to 31% of your pre-tax income.

There are several ways that your lender can get the payment down to 31% of your income. The first way the payments are reduced is through lowering your interest rate. The US Treasury is offering incentives to mortgage lenders so that they can go as low as 2% interest. It is important to note that not all homeowners will get an interest rate that low. You will only get an interest rate low enough to get you to a payment that is about 31% of your income.

If the 2% interest rate is not enough for you to get your monthly payment to 31% of your income, your mortgage company can extend the terms of your loan to make sure you will be able to have your payments lowered. Depending on the mortgage lender, the terms can be extended up to 40 years. The third option when other two are not able to be done is forbearance. Your lender will take a part of your principal from your payments and make it low enough so you can pay your monthly payment at 31%. You will still have to pay this principal, it will just be deferred until a later time. It is also possible that a portion of your principal will be forgiven.

It is important for you to realize, even if you meet the requirements for the HAMP program through the US Treasury, you still may not meet requirements of your lender. They are under no obligation to accept the incentives offered in order to participate in this plan.