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Post HAMP Mortgage Modifications - Expected Terms and Other Points

The most popular mortgage modification program prior to December 31, 2016 was of course the US Government's backed Home Affordable Mortgage Program, also known as "HAMP". The HAMP mod, if granted, usually provided the homeowners/borrowers with the most favorable terms when compared to other government backed or in-house Modifications offered by mortgage lenders. HAMP modifications required homeowners to commit a minimum of 31% of their monthly gross income toward their new monthly mortgage payment. The 31% minimum payment requirement included not only principal and interest, but monthly property taxes and homeowners insurance as well. With a HAMP modification, the mortgage lender would usually reduce the borrowers' interest rate to 2% for the first five years of the modified mortgage and capitalize all outstanding mortgage arrears at the end of the new modified HAMP mortgage. If the homeowner could not afford the new monthly payment based on the standard 30 year amortization schedule, the lender would often lower the principal and interest payment on the HAMP modified mortgage by using a 40 year amortization schedule (when it otherwise made sense to approve issue the modified mortgage).

Beginning with the sixth year of the HAMP mortgage, the homeowner's interest rate increased one percentage point to 3%, and thereafter increased by 1% a year until it would be capped at the best available mortgage rates in effect at the time the applicant's HAMP modifications was granted.

Today, most mortgage lenders and servicers continue to offer in-house modified mortgages to qualified borrowers who have defaulted on their mortgage with similar terms to the previous HAMP modification. In presenting homeowners' pertinent financial information a professional should describe the financial and related hardships which caused the borrowers to default on their original mortgage obligation, while also explaining what the borrowers have done to stabilize their financial situation, i.e. put themselves in a position to be able to catch up on their mortgage arrears and be able to pay and remain current on the terms of the proposed modified mortgage, if granted. Along these lines the homeowners' projected monthly income and expenses should be able to hopefully reflect this.

Other significant factors, which will likely affect a lenders' decision to approve a mod application is how much, if any, equity exists in the homeowners property. For obvious reasons the less equity existing in a homeowners' property the better. The reason for this is simple - if lenders are forced to acquire these debtors' properties which have little or nonexistent equity through the foreclosure process, or by taking title by way of a deed in lieu of foreclosure, the lender is certainty going to have a financial loss of tens if not hundreds of thousands the of dollars when forced to sell these properties.

Another significant factor underwriters will likely consider is the homeowners filing for bankruptcy protection at the same time or prior to the filing or applying for a modified mortgage. Underwriters almost universally consider a homeowners' filing for bankruptcy protection as a positive factor in determining whether or not to grant a mod application. By dealing with previously unmanageable debts through a successful bankruptcy, the underwriters are likely to find that the homeowner is now in a much better position to be able to stay current under the terms of their new modified mortgage. This is particularly true when the new modified mortgage payment is less or significantly less than the homeowners original payment.

There are important benefits to retaining a professional such as Marc G. Alster, Esq. or other professional who deals with lenders submits mortgage mod applications on a regular basis.

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The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.

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