Home mortgage modification changes

Thursday, April 01, 2010

Recent changes to the Obama Administration’s Making Home Affordable program (HAMP) are designed to help people who are unemployed, and those with homes worth less than the amount they owe on their mortgages, known as “underwater” homes.

For “underwater” mortgages, changes to the HAMP program include:

• Reductions in a homeowner’s principal balance (amount originally borrowed) must be considered for a borrower who owes more than 115% of the value of the home. • Chance to refinance a mortgage into a long-term, fixed rate FHA loan. This option is geared to borrowers who have not fallen behind on payments, and whose lender will agree to reduce the principal by 10% or more, leaving the loans (1st & 2nd mortgages) worth no more than 115% of the value of the home.

For unemployed homeowners, participating lenders must:

• Offer at least a three month deferral (forbearance) of mortgage payments, with the chance of six months of deferred payments. Eligibility includes loans below $729,000 evidence of unemployment, and requests for help within 90 days of delinquency.

Other Changes:

• No foreclosure while a homeowner is in or trying to receive a trial mortgage modification. • Require servicers/lenders to consider borrowers in bankruptcy for loan modifications. • Larger financial incentives for second lien holders/lenders to make loan modifications work.

Consumer Action is hopeful that these additions to HAMP will help to dramatically increase the number of homeowners who qualify for a mortgage modification. Million of consumers are still at risk of losing their homes and are in desperate need of an opportunity to modify or restructure their loan. Further steps are needed. Consumer Action will continue to work with the Administration to try to strengthen and improve consumers’ chances of saving their homes.

To see if your servicer/lender participates in the Making Home Affordable (HAMP) program visit makinghomeaffordable.gov or call 1888-995-HOPE (4673), and seek help for free from a HUD approved housing counselor.