HAMP Mortgage Help

The U.S. Home Affordable Modification Program (HAMP) can help you avoid foreclosure by reducing your monthly mortgage payments to an affordable level. HAMP is indirectly administered by the government, but you must qualify and negotiate for benefits directly with your mortgage servicer, the financial institution that collects your monthly payments and manages your mortgage. Learning more about your mortgage and HAMP can help you work with your servicer.

Mortgage Requirements

• You can only benefit from HAMP if your mortgage servicer participates in the program. If so, you may be eligible if your mortgage is for a one- to four-family home that you live in; you received your mortgage on or before January 1, 2009; and owe no more than $729,750 on your first mortgage if you own a single-family home, though the limit is higher for two- to four-family homes.

Borrower Requirements

• Borrowers must also fulfill requirements in order to be eligible for HAMP. Your mortgage payment, taxes, insurance and homeowners' association fees must be more than 31 percent of your gross (pre-tax) income, and you must participate in HUD-approved housing counseling if these are more than 55 percent of your gross income. You must also document a financial hardship that makes your payments unaffordable and stay current during a "trial modification" period before the terms of the modification become permanent. You do not need to be behind on mortgage payments to qualify for HAMP.

Main Features of HAMP Modifications

• Modifications lower the amount of the monthly payment by reducing the interest rate on the loan, extending the term of the loan or making part of the principal due at a later time, known as "forbearance." In effect, forbearance would create a "balloon" payment when that part of the principal comes due. HAMP-modified rates are fixed for five to six years and require an escrow for property taxes and homeowners' insurance if your loan doesn't already have one.

Benefits

• You loan servicer may not refer your mortgage for foreclosure or go forward with a sale on a HAMP-eligible mortgage until they have evaluated your loan for eligibility, if you're being considered for a trial period or after you've made your first trial period payment. If you become unemployed before or during your trial modification, you can ask your servicer to consider you for eligibility for the Home Affordable Unemployment Program (UP).

Costs and Disadvantages

• You must gather income and financial documentation to negotiate with your servicer, who will evaluate if you're eligible for HAMP. The process that has become complicated by the volume of borrowers seeking modifications as well as media reports and court decisions pointing to sloppy recordkeeping on the part of loan servicers. Also, a HAMP modification will affect your credit, and you'll have to pay modification or past-due fees.

How to Apply

• You'll need to collect certain documents to prove your income and submit these to your loan servicer with HAMP's "Request for Modification and Affidavit" and an IRS tax authorization form that allows your servicer to request a copy of your tax records. The forms and a list of required income documents are available on the Making Home Affordable website. You can get free help completing the forms through the Homeowner HOPE hotline at 1-888-995-HOPE (4673). Your servicer's phone number and contact information is located on your mortgage bill.