HAMP stands for Home Affordable Mortgage Program, and is a government backed program. The aim of the program is to help those who have found themselves in financial difficulty and are facing the prospect of losing their home because they cannot afford the repayments. This program is not available to everyone, and applicants must meet a number of basic criteria before they are considered.
- Find a loan modification company. Homeowners who want to apply to the program must have consulted a loan modification company before starting the process. A simple online search can yield numerous companies who are willing to assist with being accepted on the HAMP. It is important to thoroughly research any company that may be able to help before selecting one.
- The home must pass a Net Present Value Test. This is a straightforward test which is used to determine whether the value of the modified loan will be greater than the value of the current mortgage. If the home fails this test then the mortgage lender is not required to modify the loan.
- The homeowner must meet the eligibility criteria. Examples of requirements include: proof of financial hardship, a mortgage payment that equals more than 31% of a homeowners income, a mortgage that was agreed before 2009, the house must be owner occupied with no more than 4 units, and the principle balance must not exceed $729,750.
It is also essential that the homeowner realises that a HAMP modification will have repercussions. Until the application is approved, foreclosure proceedings will not be stopped. If the homeowner is approved, they will enter into a 3 month trial period for the modified mortgage, which means payments must be made on time and in full. The homeowner’s credit score may also be affected.