Whaꦺt Is the Home Affordable Modificationও Program (HAMP)?

The Home Affordable Modification Program (HAMP) was a loan modification program introduced by the federal government in 2009 to help struggling homeowners avoid foreclosure. The program's focus was to help homeowners who paid more than 31% of their 澳洲幸运5开奖号码历史查询:gross income toward mortgage payments. The ꩲprogram expirꦚed at the end of 2016.

Understanding the Home Affordable Modifica🎃tion Program (HAMP)✃

HAMP was created under the 澳洲幸运5开奖号码历史查询:Troubled Asset Relief Program (TARP) in response to the 澳洲幸运5开奖号码历史查询:subprime mortgage crisis of 2008. During this period, many American homeowners were unable to sell or refinance their homes after the market crashed because of tighter credit markets. Monthly 🎃payments became unaffordable when higher market rates kicked in on adjustable-rate mortgages (ARMs), leaving plenty of people at risk of foreclosure.

To qualify, mortgagors needed to make more than 31% of their gross income on their monthly payments. Property requirements were also enforced—they had to pass the net present value (NPV) test, along with other eligibility standards.

A property became eligible if the analysis showed a lender or investor currently holding the loan would make more money by modifying the loan rather than foreclosing. Other than the requirement that a homeowner prove financial hardship, the home had to be habitable and have an unpaid 澳洲幸运5开奖号码历史查询:principal balance under $729,750.

Relief took several forms, all of which would have the effect of reducing monthly payments. For instance, eligible homeowners could receive reductions in their mortgage principal and 澳洲幸运5开奖号码历史查询:interest rates. There was also the possibility of a temporary postponement of mortgage payments, also known as 澳洲幸运5开奖号码历史查询:forbearance. And, if favorable, a homeowner was able to extend their existi🌳ng loan ter♌ms.

In many cases, an already modified loan was eligible for HAMP modification, too, reducing a homeowner’s payment eve🌺n further.

Special Considerations

The government refers to the ratio of payments to gross income as the front-end debt-to-income ratio (DTI). The HAMP program, working in conjunction with 澳洲幸运5开奖号码历史查询:mortgage lenders, helped provide incentives for banks to reduce the debt-to-income ratio to less than or equal to 38%. The Treasury would then step in to minimize the DTI ratio to 31% or less.

HAMP incentivized private lenders and investors to fund their loan adjustments. Mortgage servicers received an up-front payment of $1,000 for each eligible modification they performed. These lenders were also eligible to receive up to $1,000 per year for each borrower in the program for up to five years, and a $5,000 one-time payment at the end of year six.

The original HAMP was limited to 澳洲幸运5开奖号码历史查询:principal residences. In 2012, it was revised to include homes not occupied by the owner, ﷽households with multiple mortgages, and homeowners whose DTI ratio was either lower or higher than the ඣoriginal requirement of 31%.

꧋The Home Affordabl💟e Modification Program (HAMP) vs. the Home Affordable Refinance Program (HARP)

HAMP was complemented by another initiative called the 澳洲幸运5开奖号码历史查询:Home Affordable Refinance Program🦩 (HARP). Like HAMP, HARP was offered by the federal government, but there were a few subtle differences.

While HAMP helped people on the verge of 澳洲幸运5开奖号码历史查询:foreclosure, homeowners needed to be underwater or close to that point to qualify for HARP. The program allowed people with homes worth less than the outstanding balance on their mortgages to refinance their loans, as well as homeowners with a 澳洲幸运5开奖号码历史查询:loan-to-value ratio (LTV) of more than 80%.

Only those whose loans were guaranteed or acquired by 澳洲幸运5开奖号码历史查询:Fannie Mae or 澳洲幸运5开奖号码历史查询:Freddie Mac before May 31, 2009, were eligible. Eligibility was also contingent on whether the homeowner was up-to-date on their mortgage payments. While the mortgage modification can result in lower monthly payments, it can also 澳洲幸运5开奖号码历史查询:impact the borrower's credit score.

In addition, mor🌸tgagors sho💧uld have benefited from lower payments or from switching to a more stable mortgage product.

The deadline for HARP was originally intended for Dec. 31, 2017. However, that date was extended, pushing the program's expiration date to December 2018.

The Bottom Line

The Home Affordable Modification Program (HAMP) was a program that modified mortgages for borrowers struggling to make their mortgage payments following the 2008 financial crisis. HAMP was active from 2009 to 2016 and it effectively reduced a home's principal, reducing the possibility that the borrower would default on the loan.