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Posted March 21st, 2012 under Government Mortgage Help

Loan Modification Help from the Feds for Distressed and Underwater Homeowners

Tags: mortgage help, mortgage assistance, help with mortgage, mortgage debt relief, avoid foreclosure

Loan Modification Help from the Feds for Distressed and Underwater Homeowners

We recently published a blog post on loan modification options for distressed and underwater homeowners. One of the options we mentioned but didn’t elaborate on there was the federal government’s Making Home Affordable Program (MHAP). 

This federal program was designed to help American homeowners keep their homes, by making changes to qualifying mortgages. Under the broad Making Home Affordable umbrella, there are a number of programs through which you might find help:

HAMP (Home Affordable Modification Program): If you are still employed, yet are having a hard time making your mortgage payment, then you may qualify for HAMP. It can lower your payments to 31% of your verified monthly gross (pre-tax) income – that means your mortgage will be no more than 31% of your income (before taxes are taken out). You could see a 40% drop in your monthly mortgage payment.  The HAMP qualifications are:

  • You own a one- to four-unit home that is your primary residence (this is where you live most of the time)
  • You got your mortgage on or before January 1, 2009
  • You 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
  • You 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).

HARP (Home Affordable Refinance Program): If you are unable to obtain traditional refinance (because the value of your home has declined so much) HARP might be able to help. With HARP, loan refinance fees will apply.  

2MP (Second Lien Modification Program): If your first mortgage (your primary home loan) was permanently modified under HAMP and you have a second mortgage on the same property, you may be eligible for a modification or principal reduction on your second mortgage under 2MP. This program was designed to work with HAMP participants – as a long-term solution to help you afford to stay in your home.

HAFA (Home Affordable Foreclosure Alternatives Program): This federal short sale or deed-in-lieu program does not hold you responsible for the difference between what you owe on your mortgage and the amount that your home sells for (see our blog article on deficiency judgments after a foreclosure). You will also receive $3,000 in relocation assistance upon successful closing of your short sale or deed-in-lieu of foreclosure.

HHF (Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets): If your state is on the list, this program may help you avoid foreclosure.  You don’t have to be participating in the MHAP to qualify. This program was designed to help you if you are either under-employed (you don’t work as many hours as you need to) or unemployed.

Many (probably millions) of distressed homeowners have tried over the last four years to work with their lenders to get a loan modification that will make their monthly mortgage payments more affordable.  Many have not been successful.  These government mortgage help programs were theoretically designed to help give homeowners a louder voice, and more power in getting mortgage modifications.  They haven’t been as successful as most people would like.

At Homeowner 101, we certainly want you to explore your loan modification options.  We also want you to explore your other options – you are not stuck in this situation.  Short sale, HARP 2.0 mortgage refinance, strategic default, foreclosure, even doing nothing are all options you have.  Which is best for you?  To answer that question you’ll need to sign up for your personalized, one-on-one Underwater Homeowner Assessment and Action Plan today.