What Is the Home Affordable Modificatꦓion 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官方开奖结果体彩网:gross income toward mortgage pa🍌yments. The program expired at the end of 2016.

Understanding the Home Affordable Modification Progr෴am (HAMP)

HAMP was created under the 澳洲幸运5官方开奖结果体彩网:Troubled Asset Relief Program (TARP) in response to the 澳洲幸运5官方开奖结果体彩网: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 r🌟ates 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官方开奖结果体彩网: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官方开奖结果体彩网:interest rates. There was also the possibility of a temporary postponement of mortgage payments, also known as 澳洲幸运5官方开奖结果体彩网:forbearance. And,♋ if favorable, a homඣeowner was able to extend their existing loan terms.

In ma꧅ny cases, an already modified loan was eligible for HAMP modification, too, reducing a homeowner’s payment even 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官方开奖结果体彩网: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官方开奖结果体彩网:principal residences. In 2012, it was revised to include h൲omes not occupied by the owner, household🎉s with multiple mortgages, and homeowners whose DTI ratio was either lower or higher than the original requirement of 31%.

The Hℱome Affordable Modification Program (HAMP) vs. the Home Affordable♔ Refinance Program (HARP)

HAMP was complemented by another initiative called the 澳洲幸运5官方开奖结果体彩网:Home Affordable Refinance Program (HARP). Like HAMP, HARP was offered by the federal government, but there were a few subtle d༒ifferences.

While HAMP helped people on the verge of 澳洲幸运5官方开奖结果体彩网: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官方开奖结果体彩网:loan-to-value ratio (LTV) of more than 80%.

Only those whose loans were guaranteed or acquired by 澳洲幸运5官方开奖结果体彩网:Fannie Mae or 澳洲幸运5官方开奖结果体彩网: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官方开奖结果体彩网:impact the borrower's credit score.

In addition, mortgagors should have benefited from loꦜwer 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.