If you suddenly find yourself with a mortgage on your Denver home that is too high for your income, or if your circumstances have changed since you took it out, you may find help with the government's Home Affordable Modification Program. The need for HAMP originated with President Obama's Making Home Affordable program, announced in February, 2009. Created by the U.S. Treasury Trouble Assessed Relief Program (TARP), HAMP seeks to facilitate working with your lender to make the payments affordable. Changing the terms of a mortgage is a complex process that involves a ton of documentation from you and a ton of tedious paperwork that must be filled out accurately. HAMP strives to streamline the process.
The program aims to capture applicants who are either delinquent or on course to be. Meg Reilly from the Treasury Department claims that over 25,000 applicants are processed through HAMP each week. To date, over 500,000 loan modifications are in process. The program got off to a slow start as servicers got up to speed; in July, President Obama strongly urged the lenders to hire more staff to meet the needs of troubled home owners. This year, Wells Fargo, a major loan servicer, claims to have hired over 5,800 people to meet the need, while many other banks have followed suit. Many necessary documents are now online.
To qualify for HAMP, you must have a mortgage payment (including principle, interest, taxes, and insurance )which is currently more than 31 % of the household's monthly income. If approved, the program will lower the payment to 31% for at least five years. At that point, the interest will increase to a current market rate capped so it won't exceed a certain level. The process, which starts with you contacting your lender, stating your case, and compiling required documents, ultimately ends with a reduced payment. To arrive at a 31% payment, the lender might reduce the interest rate to as low as 2%, extend the repayment term to up to 40 years, and possibly reduce some principle.
So, does all this mean that HAMP will help you? The answer is "maybe." You must prove to the lender that you have a good reason to have the loan modified. More importantly, you must have the income to devote 31% to housing costs. If you are unemployed without prospects for a job, the program will probably not work for you.
Will HAMP help you quickly? Here, the answer is "Probably not." The process itself is lengthy. After you provide all the documentation, your case is reviewed. If you receive preliminary approval, you will be set up for a three month trial with your new payment while the bank reviews and processes your documents. If the bank cannot process your documents in time, you can get a two month extension. Once all the paperwork is processed, you will receive all the documentation in the mail.
Many who have gone through the process claim that it is hard to reach servicers. When they do get through, they complain they get a run around about their eligibility, often have to submit their documents several times, and then be told they do not qualify after starting the process. Paperwork gets clogged in the system, as people are on trials for much longer than three months with a two month extension.
Some critic say this slowness is because lenders are overwhelmed; other take a more calloused view that it is more profitable for banks to do foreclosures than do workouts. In any case, the Federal Government is committed to making this program work. This means they will also continue to help smooth out the process, as well as put pressure on the lenders to step up their processing time and increase the number of people they accept.
If you fear you are on the course to foreclose, do not despair. HAMP is a great place to start to try to work out your situation. You can take the first step by contacting your mortgage company or by visiting the Making Home Affordable site.
This is also a good time to talk to Marianne Bandy, the Certified Distressed Property Expert (CDPE) at the Bandy Team of RE/MAX Professionals. She will discuss other loan modification alternatives with you to avoid foreclosure on your home in Denver, Aurora, Centennial, or anywhere else in the Denver Metro Area. Don't Let Time Run Out - Help Is Available. Contact Marianne today at 303-746-7799.