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HAMP Has Expired — Here are Other Alternatives

The Home Affordable Modification Program (HAMP) was designed to help homeowners who were struggling with their monthly mortgage payments by modifying the terms of their loan.

Though HAMP has ended, other loan modification programs are available if you feel you’re on the verge of default. This article explains these initiatives and how homeowners looking for assistance may qualify.

We’ll cover: 

What is HAMP?

HAMP is a government-backed program designed to help homeowners with conventional mortgages owned by Fannie Mae or Freddie Mac who were at risk of foreclosure, by offering them a chance to receive lower monthly mortgage payments. HAMP ended on Dec. 30, 2016, and is no longer available.

To qualify for the program, homeowners need to have documented financial hardship and demonstrated their ability to afford the mortgage after the loan modification. Homeowners typically saved about $530 or more on their monthly mortgage payments under HAMP, according to the U.S. Treasury Department.

Understanding a loan modification vs. a refinance

What do you gain from a loan modification versus a refinance? Let’s break down the differences:

Modify or refi?

A mortgage modification program allows you to modify your mortgage, as the name suggests. Your lender changes the original terms of your mortgage — by extending your loan term or reducing your interest rate, for example — but you keep the same loan.

Homeowners experiencing financial hardship and having trouble maintaining on-time mortgage payments can benefit from a loan modification program, and recent research shows there’s still a need for this type of mortgage assistance. Of the homebuyers who took out mortgages during the first quarter of 2019, nearly 1% of them were delinquent six months after origination, according to a report from Black Knight, a data and analytics firm.

A mortgage refinance, on the other hand, involves replacing your existing mortgage with a new loan that has better terms, including a lower mortgage rate and monthly payment or a more stable loan type, such as switching from an adjustable-rate to a fixed-rate mortgage.

How did HAMP differ from HARP?

Another government-backed program, Home Affordable Refinance Program (HARP), was created to help mortgage borrowers who were underwater on their loans — meaning they owed more than what their house is worth — to refinance their mortgage. That program expired Dec. 31, 2018.

Unlike HARP, HAMP didn’t provide borrowers the opportunity to refinance. Instead, they were able to modify their loan and receive smaller monthly payments, providing them with a mortgage that was more affordable and sustainable without going through the refinance process.

HAMP alternatives

Although HAMP is no longer available, it doesn’t mean struggling homeowners don’t have options. Whether you have a conventional or government-backed mortgage, such as a Federal Housing Administration (FHA) or U.S. Department of Veterans Affairs (VA) loan, there are loan modification programs available.

How it helps  Who it’s for 
Fannie/Freddie Flex Modification  Reduce mortgage payments by 20% and potentially get to a 40% front-end DTI ratio Conventional mortgage borrowers with a Fannie Mae or Freddie Mac-owned loan
FHA loan modification  Reduce interest rate, extend loan term or add past-due amount to loan balance Borrowers who currently have an FHA loan
VA loan modification  Add past-due amount to loan balance and/or extend loan term Borrowers who currently have a VA loan

Fannie Mae/Freddie Mac Flex Modification

Fannie Mae and Freddie Mac both have options for mortgage borrowers looking to modify their loan and save their home. It’s called the Flex Modification program.

The goal of the Flex Modification program is to reduce mortgage payments by 20%. Also, depending on how long a homeowner is delinquent, the program would get the borrower to a 40% front-end debt-to-income ratio, which is the percentage of gross monthly income used to make mortgage payments.

The program can be applied to all mortgage delinquencies and loans that are in imminent default, meaning the homeowner is current or less than 60 days late on payments.

To qualify for the Fannie/Freddie mortgage modification program, you’ll need to meet several eligibility requirements, including:

  • The mortgage must be a conventional loan.
  • The mortgage must either be 60 days or more delinquent, or in imminent default.
  • The mortgage must have been originated at least 12 months before the loan modification.
  • The mortgage can’t currently be in any other foreclosure prevention program, such as forbearance.
  • The mortgage can’t have previously been modified three or more times.
  • You can’t have failed a Flex Modification trial period within a year of being evaluated for a new modification.

Conventional mortgage borrowers can determine which agency owns their loan by using the loan lookup tools found on Fannie Mae’s and Freddie Mac’s websites.

FHA loan modification

The FHA Home Affordable Modification Program, helps struggling homeowners modify their mortgage by reducing their interest rate, extending their loan term or adding late payments to the principal mortgage balance. There’s an option to reduce the unpaid principal balance by up to 30%, which is referred to as a partial claim.

FHA loan modification qualifications include:

  • Not qualifying for any other mortgage assistance programs.
  • Having a maximum front-end DTI ratio of 31% and back-end DTI ratio of 55%. (The back-end ratio refers to the percentage of gross monthly income used to make all monthly debt payments, including your mortgage payment.)
  • Completing a three- or four-month payment plan trial, depending on whether you’re in default or imminent default.

VA loan modification

The VA mortgage modification program involves adding the past-due amount to the outstanding principal balance and calculating a new payment schedule. It could also involve a loan term extension to get a lower monthly payment.

Mortgage modification program requirements include:

  • Demonstrating your ability to pay the mortgage and not go back into default.
  • Making at least 12 monthly payments since your mortgage closing.
  • Not having any loan modifications in the past three years.
  • Not having more than three loan modifications since the mortgage closed.

Other mortgage relief programs

If you don’t qualify for one of the HAMP alternatives mentioned above, consider one of these mortgage relief programs to help you better manage your mortgage:

  • High-LTV refinance. If your loan-to-value ratio is too high for a standard refinance or if you’re underwater, you could qualify for a high LTV refinance through Fannie Mae or Freddie Mac, depending on which agency owns your conventional loan. The minimum required LTV ratio for both programs is 97.01%.
  • Forbearance. Mortgage forbearance is an agreement between you and your lender to temporarily suspend or reduce your mortgage payments when you’re facing financial hardship. Once your forbearance term ends, you’ll typically either repay what’s owed in a lump sum or pay a portion of it monthly with your mortgage payment until it’s paid in full.
  • Repayment plan. Another option for mortgage assistance is a repayment plan, which works best in situations where you’re already behind on your mortgage payments. Under a repayment plan, you agree to repay your past-due amount over a set period of time to bring your mortgage current. The balance owed is divided up and added to your monthly mortgage payments.

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