Home Affordable Modification Program
The US government has committed $72 billion dollars to the Home Affordable Modification Program (HAMP). HAMP gives incentives to banks to re-negotiate your loan terms so that your payment is affordable. The goal of HAMP is to reduce your payment to 31% of your gross monthly income. To get to the 31% target, first the interest rate is reduced. If more changes are needed to hit the target payment, the next option is to extend the loan term up to 40 years. If still more is required to reach 31% of gross income, the lender may defer or forgive part of the principal balance.
Sounds great? Maybe… If you meet the qualification requirements and you have income to pay the loan. To qualify, you have to:
- Be current on your loan payments
- Own the home as your primary residence
- Have a mortgage owned or guaranteed by Fannie Mae (look up your loan) or Freddie Mac (look up your loan)
- Have a 1st mortgage not exceeding 125% of your current home value
- Have income to make payments
Other programs related to HAMP that might assist you are the Home Affordable Refinance Program (HARP) and the Second Lien Modification Program (2MP). Information on these programs can also be found at the Making Home Affordable website.