While the economy was in the midst of recession in 2009, the federal government released the Making Home Affordable Program. Its goal is to help homeowners avoid foreclosure. Homeowners who have a loan that is controlled or owned by Fannie Mae or Freddie Mac and whose mortgage payments are current might be able to refinance into a low-interest, fixed-rate loan.
The Home Affordable Modification Program, or HAMP, is one of two components of this government initiative. Mortgage holders who have experienced an uncontrollable change in circumstances and are facing potential foreclosure may find relief through HAMP. They may able to reduce their monthly mortgage payments and have foreclosure proceedings suspended until their mortgages are back on track.
HAMP makes mortgages more affordable from a short-term perspective by allowing lenders to modify mortgage terms. The goal is to adjust the mortgage interest rate and term to achieve a borrower debt-to-income ratio of 31 percent or less. This ratio does not include a second mortgage on the property, mortgages on other homes, or installment payments for vehicles or other secured property. If these other issues are where peoples problems stem from, contacting a bankruptcy lawyer immediately is their best bet.
The lender will reduce the mortgage interest rate to no lower than two percent for five years and if required, extend the loan term to a maximum of 40 years from inception. Once the debt-to-income ratio reaches 38 percent, the government and lender share in the remaining cost to reduce it to 31 percent. Borrowers may qualify it the mortgage is on their principal residence, their loan is less than or equal to $729,750, a change of circumstances has created financial hardship, they are at risk of foreclosure for particular reasons, and they can prove sufficient, steady income to make modified loan payments.
Foreclosure risk must be due to missing two or more mortgage payments or payments on the first mortgage that exceed 31 percent of gross income. The program requires the suspension of foreclosure proceedings until three months after the modified loan payments begin. To achieve the debt-to-equity ratio goal, loan servicers can alternatively reduce mortgage principal or delay payment on a portion of principal until the loan ends.
The government estimates that between three and four million U.S. homeowners can benefit from HAMP. However, they must act quickly because the program is scheduled to expire on December 31, 2012. Americans who are considering bankruptcy because they cannot stay current on their mortgages should explore whether HAMP is a feasible solution. An expert bankruptcy attorney can be your guide to whether a HAMP modification or using Chapter 13 bankruptcy is your best bet to get your head above water and save your home. Most importantly, don’t wait any longer, get help immediately and save your home.