In March 2009, the Obama Administration published detailed program guidelines for the Making Home Affordable (MHA) Program, of which the Home Affordable Modification Program is a key component.
Information about the various programs available to homeowners through the MHA program can be found by clicking on the links below:
- Home Affordable Modification Program - designed to enable borrowers that meet eligibility requirements to avoid foreclosure by modifying loans to a level that is affordable for borrowers and sustainable for the long-term.
- Home Affordable Unemployment Program - provides servicers with the flexibility to provide assistance to borrowers whose hardship is related to unemployment and is a supplemental program to the Home Affordable Modification Program (HAMP). Specifically, UP requires servicers to grant qualified unemployed borrowers a forbearance period during which a borrower’s monthly mortgage payment may be reduced or suspended prior to considering such borrowers for HAMP.
- Second Lien Modification Program - designed to enable borrowers struggling with their mortgage to lower payments on second mortgages.
- Home Affordable Foreclosure Alternatives Program - provides borrowers that do not qualify for a HAMP modification with options to avoid foreclosure through a short sale or deed-in-lieu.
- Treasury FHA-HAMP - provides certain incentive payments under HAMP to eligible borrowers with FHA-insured first lien mortgage loans that are modified under applicable FHA guidelines.
- Treasury FHA/2LP - designed to enable borrowers who are current on a negative equity mortgage to restructure their debt and refinance into an FHA-insured first lien loan.
- RD-HAMP - provides certain incentive payments under HAMP to eligible borrowers with Rural Housing Service-guaranteed first lien mortgage loans that are modified under applicable RHS guidelines.
According to the MHA website, to qualify for HAMP, you must:
- Own a one- to four-unit home that is your primary residence;
- Have received your mortgage on or before January 1, 2009;
- Have a mortgage payment (including principal,interest, taxes, insurance, and homeowners association dues) that is more than 31 percent of your gross (pre-tax) monthly income; and
- Owe an amount that is less than or equal to $729,750 on your first mortgage for a one–unit property (there are higher limits for two– to four– unit properties).
Homeowners who qualify for HAMP must complete a trial period of three or four months to demonstrate that they will be able to make their reduced payments on time before their mortgage will be permanently modified. To create an affordable payment, your mortgage servicer applies a series of modification steps in the following order:
- Rate reduction to as low as two percent;
- Term extension up to 40 years; and
- Principal forbearance (or deferral).
A portion of the principal can also be forgiven, although that is optional on the part of the servicer.
The modified interest rate will be fixed for a minimum of five years as specified in your modification agreement. Beginning in year six, the rate may increase no more than one percentage point per year until it reaches the Freddie Mac Primary Mortgage Market Survey rate (essentially the market interest rate) at the time your permanent modification agreement was prepared.
For every month a homeowner makes a payment on their permanent modification on time, they can accrue an incentive of $1,000 each year to reduce the amount of principal they owe, up to $5,000.