In 2009, the Federal Government was eager to discover how to help homeowners stay in their homes. They created the Making Home Affordable program to do just that. Several operations fell beneath that umbrella including:
- Home Affordable Modification Program (HAMP). Created to help manage the growing subprime mortgage crises. While the loan program has now expired, it paved the way for many homeowners who would not otherwise have been able to do so, to remain in their homes.
- Principal Reduction Alternative (PRA). A program that helped homeowners who had a loan-to-value ratio that was above 115 percent.
- Home Affordable Unemployment Program (UP). Offering a temporary forbearance for homeowners who found themselves unemployed.
- Second Lien Modification Program (2MP). Allows lenders to modify second liens when the first lien is modified through HAMP.
Other programs were created during this time to help avoid foreclosures during a painful economic downturn in our history. The better you understand what the HAMP program had to offer homeowners, the better you can determine if a loan modification program similar to this one might be beneficial to you and your needs to create a more affordable and sustainable mortgage repayment situation.
What is the Home Affordable Modification Program?
HAMP, also known as the Home Affordable Modification Program, is not a refinancing of your mortgage. Instead, it is the same loan, but the lender modifies the original terms of the loan. Some of the most common modifications include things like extending the terms of the loan (so you make payments for more months) or by reducing the interest rate of your loan. Either example allows you to pay less each month so you can remain in your home more affordably.
Most homeowners can save approximately $530 per month on their mortgage payments with the HAMP. That monthly note reduction allowed them to sustain their new payments and keep their homes long-term. Something that might not have been possible otherwise.
Homeowners were required to present documentation verifying their financial hardship to qualify for a HAMP modification. Additionally, they had to show their ability to continue making monthly mortgage payments once the modification was granted.
Who Needs a HAMP Loan Modification?
Homeowners facing the loss of their home due to financial hardships may find themselves in need of a HAMP modification or something similar. Unfortunately, the HAMP program expired December 30, 2016 and is not available to homeowners today who did not have the modification at that time.
Sadly, the need for this type of loan modification program remains, even in a stronger housing market, as families face financial hardships for many different reasons. There are modification programs available, but none that offer the full scope of benefits or the wide reach of borrowers the HAMP program helped.
The program operated under the knowledge that it was better for everyone when homeowners were able to remain in their homes. Not just the homeowners and their families, but also for lenders, who were struggling at the time, and larger communities as well. Through the HAMP program more homeowners were able to remain in their homes throughout the recession and beyond. It was a real win for everyone because they worked sustainability into the model, requiring homeowners to present evidence that they would be able to make the new payments assigned to them once the modification occurred.
Pretty much, anyone who meets the criteria of getting a HAMP loan needed one. These loans were literal lifelines for so many people when they were in effect, helping them to save their homes and allowing them to get their lives back on track after temporary setbacks left them reeling.
Who Qualified for HAMP Loans?
Of course, not everyone qualified for the HAMP modification program. There are certain criteria homeowners must have met to do so. These qualifications helped determine eligibility for acceptance into the HAMP program:
- Home must have been financed before January 1, 2009.
- Homeowners must be behind on payments and at risk of foreclosure.
- Homeowners must demonstrate financial hardship that caused them to fall behind on payments.
- Property must not have been condemned.
- Homeowners must have had no real estate fraud convictions within the previous 10 years.
- Homeowners must not owe more than $729,750 on their primary residence (if it is a single-family home).
For homeowners who met the appropriate criteria, the next step was for homeowners to contact their mortgage lender to determine if there are additional criteria established by the lender to qualify for the HAMP modification program. Assuming, of course, that their lenders participated in the HAMP program.
The HAMP program was a literal lifesaver for many families hit hard by the economic downturn of the time. Not only did it help them to avoid foreclosure while remaining in their homes, it also helped them restore their credit and get fresh starts with other monthly expenses.
Now that the HAMP program has come to an end, no one qualifies for these once-critical modifications to spare homeowners from all walks of life the pain of a foreclosure.
How Is HAMP Different from HARP?
HARP is the Home Affordable Refinance Program. Rather than modifying the existing loan, this program offers homeowners an entirely new loan to work with. This program helped homeowners who found themselves “upside-down” on their home loans during the not-so-great recession, meaning they owed more on their mortgages than the current values of their homes. Most mortgage lenders refer to this situation as being “underwater” on your mortgage.
In normal circumstances, homeowners who are underwater would not qualify for traditional refinance programs to reduce interest rates and make homes more affordable to borrowers. However, the HARP refinance program allows some homeowners, especially those who have struggled and sacrificed to continue making on-time payments on their homes, the opportunity to refinance their mortgages at lower interest rates, potentially saving hundreds on their mortgages each month, and thousands of dollars in interest over the life of their loans.
HAMP is a modification program that requires homeowners to be at risk of losing their homes due to missed payments. HARP is a refinance program that requires homeowners to show a long history of on-time payments to qualify.
How can HARP help homeowners save even more money?
Because HARP is a completely new loan, rather than a modification, homeowners have more options for savings, including things like:
- Switch from adjustable rate mortgages (ARMs) to fixed-rate mortgages.
- Bypass the appraisal process. While not a feature for all HARP refinance loans, it is possible and that change could save you hundreds of dollars.
- Secure much lower interest rates.
- Reduce the terms of the loan. This means you’ll pay less interest over time and your home will, ultimately, cost you less.
Both HAMP and HARP have a lot to offer the right homeowners, but neither is suitable for all homeowners. Unfortunately, HARP, like HAMP, is no longer available to consumers, having ended on December 31, 2018.
Is the HAMP Loan Right for You?
You are the only person who could have determined whether the HAMP program was the right choice for you. The modification process allowed many “at-risk” homeowners save their homes and avoid foreclosure. The price was often a longer payment process at considerably lower monthly rates. Others used the HAMP modification as a stepping-stone to recover from unexpected hardships and once the hardship ended, they were able to double up on payments and pay off their mortgages that much faster.
While HAMP is no longer an option for struggling homeowners today that doesn’t mean there is no help available. While few programs offer the total package HAMP provided, there are some attractive options to consider in the form of the VA Loan Modification program or the FHA Loan Modification Program. Each one only applies to loans provided by FHA or VA.
People who have loans through Fannie Mae have a HARP replacement to consider in the HIRO program. Short for High LTV Refinance Option, the HIRO refinance program offers refinance options to people who are underwater on their mortgages but have continued to make timely payments despite that.
There are a few benefits to consider for the HIRO option you may not have thought of before, including the fact that if you do not currently have private mortgage insurance, it won’t be required for your new loan. Additionally, the documentation requirements have been greatly simplified, and finally, you can shop around for the best rates on your HIRO mortgage, saving you even more money in the process of refinancing your home.
If you feel HAMP would have been a viable option to help you keep your home, and you have a mortgage through FHA or the VA, you might consider one of their modification programs to help you reduce your monthly expenses so you can remain in your home. It is well worth investing a little time, energy, and effort to save your home, your credit, and the security hour home represents.
Other Options to Consider
For most homeowners, saving your home is important. Your home represents safety, security, and solace from a world that provides little of any of these things. While there may not be an abundance of government-backed modification programs that doesn’t mean there are no longer options to pursue. Contact your mortgage lender and lay the facts about your situation out. Explain to them that you are at risk of losing your home to foreclosure if that is the case, and ask them if they have any options to help you out. There could be a few you haven’t heard of and most mortgage companies are happy to work with you, within reason, to avoid the expense and hassle of foreclosure. Options they may have to offer include things like:
- Interest-only mortgage payments for a set number of months. The interest will accrue and be owed at the end of your normal mortgage term, but it allows you several months to get back on your feet.
- Deferred payments. This method defers a set number of payments until the end of your mortgage term. This lets you pay nothing for the agreed-upon number of months and adds the payments, plus additional interest to the end of the mortgage loan.
- Lender approved loan modifications for interest rates or the duration of the loan.
As you can see there are plenty of options to consider even though you no longer have the option of the HAMP modification program. Your lender may have access to resources and services you’ve not yet heard of and be able to point you in the right direction to get the help you need to spare your home and your heart the agony of foreclosure.