HAMP Home Affordable Modification ProgramHAMP Home Affordable Modification Program is designed to help as many as 3 to 4 million financially struggling homeowners avoid foreclosure by modifying loans to a level that is affordable for borrowers now and sustainable over the long term. The HAMP program is for individuals who want to keep their home. The program provides clear and consistent loan modification guidelines that the entire mortgage industry can use.
Borrower eligibility is based on meeting specific criteria
including: After determining a borrower's eligibility, a servicer will take a series of steps to adjust the monthly mortgage payment to 31% of a borrower's total pretax monthly income:
Note:Servicers may elect to forgive principal under HAMP on a stand alone basis, or before any modification step, in order to achieve the target monthly mortgage payment.
The Home Affordable Modification Program includes incentives for borrowers, servicers and investors to come to terms on a manageable payment plan to prevent foreclosure on the property. To understand the process of preventing foreclosure, let’s look at a real life timeline to understand options. Homeowner is behind on mortgage payments, on his primary residence, the loan is in default, and foreclosure is imminent. If Homeowner wants to keep his home, the first step is to talk to his lender about a HAMP modification. This will adjust his payment to 31% of his pre-tax monthly income, either through interest rate reduction, principal forgiveness or readjustment. Currently, the forgiven principal or debt, is not considered taxable income. In years past, any forgiven debt was still taxable as income, but since the Economic Stabilization Act of 2008, this forgiven debt is no longer taxable. If homeowner qualifies, he will then be placed on an active HAMP trial period to see if he can make the payments, usually 3 to 6 months. If Homeowner makes his new payment on time during his trial period, his new HAMP modification becomes permanent. If Homeowner can’t seem to make these NEW payments for whatever reason, or misses 2 consecutive payments the lender will then go over other alternatives with him to create a solution. The alternatives are either to request a sale under HAFA, or Home Affordable Foreclosure Alternatives or give the property back to the bank as a “deed in lieu”. Deed in Lieu will give the property back to the bank, but in years past it did not cancel the possibility of a deficiency judgment, if the foreclosure or REO sale doen’t bring enough money to cover the note balance. Under HAFA the investor must waive his right to seek a deficiency judgment against the borrower.
You see when you buy a house in North Carolina, you sign a Deed
of Trust, which
The bank would typically sell the distressed property and put the money towards the balance of the first note. The balance of the note that could not be paid off with proceeds from the sale, is called a deficiency judgment and the lender or investor then places a personal lien against the borrower until it is paid or settled. The new HAFA program actually offers lenders incentives to write off balances and for holders of 2nd liens or notes to take a much reduced amount in order to write off the balance as a loss and eliminate the deficiency judgment. It also offers a $1500 relocation bonus to the displaced homeowner. The HAMP Home Affordable Modification program helps distressed homeowners, who want to stay in their home create a long term sustainable payment plan, with manageable payments. ***Update on January 30th, 2012*** The treasury has told the major banks like Bank of America and JP Morgan Chase to get on with the HAMP program or lose millions in tarp funds*** Distressed Property Timeline HARP Home Affordable Refinance Program HAFA Home Affordable Foreclosure Alternatives Program Back to Real Estate Articles Investors Corner Pinehurst Area Short Sales Sandhills Area Foreclosures and REOs
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places your home as security for repayment of
the note, you get a deed to the property, which is the actual
ownership of the property, AND you sign a NOTE. The Note is the
actual promise to pay. So no matter if you give the title to the
property back to the bank or not, they can still come after you
for balances owed on the Note. Or, any holders of 2nd
liens or notes on the property can pursue judgments for their
balances owed.
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