HAMP Extended to Offer Foreclosure Alternatives
Photo: © Kali - iStockphoto
President Obama recently spoke of the American dream of homeownership, and how that dream was shaken by the collapse of the housing and mortgage markets in 2008. In his State of the Union address to the nation, the president offered hope to homeowners trapped by falling home values and rising interest rates through a plan to cut red tape so homeowners can refinance to take advantage of currently low interest rates.
Not addressed by the president, but of equal importance to people whose homes are worth less than their mortgage debt, is the extension of the Homes Affordable Modification Program (HAMP). Launched by the federal government in 2009, HAMP was slated to expire on December 31, 2012, but was extended for one year to December 31, 2013.
HAMP offers incentives to mortgage lenders to encourage them to refinance and modify existing mortgages by lowering interest rates and reducing mortgage balances to the current value of the property. The extension of the program included an expansion of the eligibility rules to make it available to more homeowners.
Details of the new HAMP eligibility criteria will be released to mortgage lenders and servicers in February 2012. Homeowners can begin submitting applications under the new eligibility guidelines in May 2012. Until then, homeowners can submit applications for modifications under HAMP to their lenders under the existing eligibility guidelines.
According to the information available so far, the following are the main changes to the program:
• Homeowners found to be ineligible under the current debt to income ratio of 31 percent may be eligible under the new criteria.
• Non-owner occupied homes and owner occupied homes with tenants are not eligible under the current program. The new guidelines would allow tenants in part of the home as long as the homes are owner occupied, or the owner intends to take occupancy.
• People who were approved for a HAMP trial period, but did not make the payments as scheduled, would be eligible for consideration for a modification under the new eligibility criteria.
• Homeowners who missed payments under an approved HAMP modification, as opposed to a trial period, would be eligible to reapply under the new rules.
The new refinance program unveiled by President Obama, and the extension of the HAMP initiative with new eligibility guidelines, promise to offer foreclosure alternatives to at-risk homeowners struggling under the weight of mortgage debt.
