Perhaps you’ve been searching the internet for different types of mortgage help and came across the Home Affordable Modification Program (HAMP). Or maybe you were enrolled in HAMP and want to understand it better. The Home Affordable Modification Program was a program that helped homeowners with their mortgages after the 2009 housing market crash. Below, we provide an overview of the Home Affordable Modification Program.
If you are currently looking for loan modification options, look no further. The attorneys at Blado Kiger Bolan, P.S. can help you examine your current options and guide you through the loan modification process for your home.
History of the Home Affordable Modification Program (HAMP)
The Home Affordable Modification Program (HAMP) is a program that emerged out of the 2009 housing market crash. It fell within the Troubled Assets Relief Program (TARP) legislation, which Congress designed to keep the U.S. economy from collapsing along with the housing market.
One of the causes of the collapse was subprime mortgages. Subprime mortgages were mortgages offered to borrowers with low, or subprime, credit ratings. Many of these loans began with a lower monthly payment and then, after a few years, would reset and increase significantly. They also had variable interest rates. The result was fluctuating mortgage payments. As a result, in 2008 and 2009, many borrowers defaulted on their mortgages.
What Is the Home Affordable Modification Program (HAMP)?
You may still wonder, what is HAMP? HAMP was one program that the U.S. government devised to help borrowers make their mortgage payments more affordable. HAMP was the umbrella of the U.S. Treasury’s Making Home Affordable Program.
Under HAMP, lenders were encouraged to modify mortgages to make them more affordable to homeowners and keep them from foreclosure. A lender would modify a loan if they believed it more cost-effective to modify the loan than foreclose. The program paid lenders $1000 for each loan they modified, up to $1000 for each year a borrower was in the program, and $5000 at the end of year six. This resulted in up to $10,000 of principal loan reduction.
HAMP was aimed to help homeowners in financial hardship—generally, those who paid more than 31% of their household’s gross monthly income in mortgage payments. Basically, HAMP would lower a homeowner’s monthly mortgage payments significantly through interest rate reductions, extending the term of the loan, forbearance, or forgiveness of some or all of the principal. Homeowners could reduce their monthly payments by $530 on average.
Who Qualified for HAMP?
HAMP had some basic eligibility requirements to participate, which included the following:
- The outstanding balance of the mortgage could not be more than $729,750;
- The loan must have originated on or before January 1, 2009;
- Mortgage payments were more than 31% of the homeowner’s gross monthly income;
- The homeowner suffered hardship;
- The owner must have been in default or at risk of default;
- The homeowner would be able to pay the modified monthly mortgage payment.
After the modification was approved, there was a three-month trial period to ensure that the homeowner could comply with the new terms. If the homeowner could make these payments, the lender would make the modification permanent.
Initially, HAMP program eligibility was limited to primary residences only. However, in 2012, Congress expanded it to include investment properties and second homes.
Is HAMP Still Available?
HAMP is no longer available. HAMP was designed to address the subprime mortgage crisis in 2008 and 2009. As a result, Congress allowed it to expire at the end of 2016.
Other Mortgage Assistance Programs
As you can see through an overview of the Home Affordable Modification Program, it has expired and is no longer available to new applicants. However, homeowners facing foreclosure may have new options available. After the global pandemic and resulting unemployment escalation, homeowners may face new difficulties in making their mortgage payments. Below are some options currently available to homeowners.
Washington’s Foreclosure Fairness Program
In 2011, Washington State passed the Foreclosure Fairness Act. Under the Foreclosure Fairness Act, once a homeowner receives a “Notice of Default” for a mortgage on their primary residence, the lender must refer them to a mediation program before they can continue foreclosure proceedings. Through the mediation process, the borrower and lender try to agree to modify the loan.
Although this process may seem straightforward, mediation and negotiation are very complicated, particularly when examining many details of a mortgage modification. You should speak with an experienced lawyer about this process and try to get legal representation for the mediation.
Homeowner Assistance Fund
Because of the economic hardships faced by many Americans during the global pandemic, Congress passed the American Rescue Plan Act in 2021. Through this, the federal government gave Washington state $173 million to:
- Help prevent foreclosures,
- Help with mortgage delinquency and defaults,
- Assist people having trouble paying for their utilities, and
- Help alleviate pandemic-related homelessness or displacement.
Washington developed the Homeowner Assistance Fund Plan to receive this funding and comply with the federal government’s requirements.
Homeowners may be eligible for mortgage assistance under the plan if they:
- Have a household income that is less than 100% of the area median income,
- Have evidence of a financial hardship related to COVID-19, and
- Own the home as their primary residence.
If eligible, homeowners may be able to receive reinstatement of their mortgage, a mortgage principal reduction, an interest rate reduction, and other homeowner-related financial assistance.
An experienced foreclosure lawyer will be able to advise you of other options that may be available to you, such as a loan modification. Speak with an attorney as soon as you begin defaulting on your loan to help understand your options.
Contact Our Law Firm for More Information on Mortgage Modifications
The Home Affordable Modification Program may be closed to new applicants, but that doesn’t mean there is no help for those needing a loan modification. The experienced real estate lawyers at Blado Kiger Bolan, P.S. can help investigate options and represent you in requesting a loan modification. Contact us today to discuss your mortgage options.