- The government first unveiled its Home Affordable Modification Program (HAMP) in 2009 as a way to slow the rising number of housing foreclosures. The goal of HAMP is for mortgage lenders to reduce the mortgage payments of those homeowners who, because of a financial setback, can no longer afford to make their payments each month.
- Through HAMP, the federal government provides a financial incentive -- $1,000 -- to mortgage lenders every time they agree to rework the mortgage loan of a struggling homeowner. Mortgage lenders can lower homeowners' payments in several ways. They can lower a homeowner's interest rates, leaving him with a smaller bill each month. They also can rework the terms of a homeowner's loans. For example, they can transform a 15-year fixed-rate loan into a 30-year version. Because the loan payments would be spread over a longer period, the monthly payment would be smaller. Lenders can also forgive a portion of a homeowner's principal loan balances.
- Qualifying for a modification through HAMP isn't always easy. The government has created a list of strict requirements for homeowners seeking this financial relief. Homeowners must be paying off a mortgage loan owned or guaranteed by Fannie Mae and Freddie Mac. The homeowners also must have taken out their loans on or before Jan. 1, 2009, and must owe $729,750 or less on their loan balance. Finally, their monthly loan payment must be at least 31 percent of their gross monthly income.
- If you are seeking relief through HAMP, you have only one option: You must work with your existing mortgage servicer. You can't shop around for other lenders. The government runs HAMP, but it's the private mortgage lenders that modify loans. In addition, even if you meet all HARP requirements, your lender is not obligated to approve your modification request. The government doesn't force any lender to approve modification requests. Approval is left to the discretion of your existing mortgage servicer.
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