The End of HAMP
What does the end of the Home Affordable Modification Program (HAMP) mean for Loan Modifications? The future of loan modifications.
The Home affordable Modification Program was set to end in 2015 but was extended through the end of 2016. So what does this mean for borrowers and homeowners who still need loan modifications?
The HAMP program was relatively simple and was calculated as such:
- They took 31% of your monthly gross income;
- This had to be below what your current mortgage payment already was and that you had experienced a hardship.
- If so they would run a waterfall to make your principal, interest, taxes and insurance (PITI) fit within that number.
- They would first bring the interest rate down to 2%.
- If the PITI payment did not fit they would then extend the term out to 40 years.
- If that still did not work they would then defer part of the principal.
- On some of these there would be some principal forgiveness over a period of time.
- If you qualify you will be given a 3 month trial plan which if you complete will them turn into a permanent loan modification.
- The initial rate in fixed for 5 years and then in year 6 and 7 it goes up by 1 percentage point each year and caps for the remaining term of the loan at the prevailing interest rate at time of loan modification.
The banks all had similar in house loan modifications that would come close to mirroring HAMP and a variety of other loan modification programs depending on the Investor (this is the party that owns your loan).
I was in a Mandatory Foreclosure Settlement Conference the other day and an underwriter from a major bank was there. I asked her what was going to happen with the end of HAMP. She thought that the bank would keep similar programs in place and that Fannie Mae and Freddie Mac where going to keep their loan modification programs in place and they were also at the time similar to HAMP.
Below is a link to the Making Home Affordable Program Performance Report through the Second Quarter of 2016. This report grades the banks on their performance and list the numbers of permanent loan modifications since its inception and the last two quarter of 2016. It also details what happened to homeowners that did not qualify under HAMP and those who HAMP Trial Loan Modification was cancelled as well as providing a wealth of detailed information on the loan modification program itself.
The Making Home Affordable Program Performance Report
So while we really don’t know what the end of HAMP will bring I imagine that the non-HAMP loan modification programs in place will stay in place and there will be enough of an outlet to help homeowners who have never recovered from the 2008 Financial Crisis or who have recently run into financial or other difficulties