The federal government’s Home Affordable Modification Program began in March, 2009, and it is expected to help 1.2 homeowners before the program expires at the end of 2012. In April, 2009, the U.S. Department of the Treasury and the Department of Housing and Urban Development announced a companion program to HAMP: the Second Lien Modification Program, which is also called 2MP. Both of these programs aid homeowners in reducing the amount of their monthly mortgage payments.
Government Mortgage Modification Programs
Homeowners who are employed but struggling to make mortgage payments may qualify for HAMP. Through HAMP, individuals may be able to lower their monthly mortgage payments to 31 percent of their monthly pre-tax income.
According to the HAMP website, homeowners typically reduce their monthly mortgage bills by 40 percent through HAMP. In addition, 18 percent of participating individuals lowered their payments by $1000.
An individual may be eligible to apply for mortgage modification through HAMP if he or she:
- Borrowed the mortgage loan on or before January 1, 2009
- Lives in the house as a primary residence
- Has mortgage payments that are more than 31 percent of his or her monthly gross income
- Owes no more than $729,750 on the mortgage loan
- Is delinquent or in danger of delinquency on the mortgage due to financial hardship
- Has documented, adequate income to support a modified monthly payment
- Has not been convicted of felony theft, larceny, fraud or forgery, tax evasion or money laundering in connection with a mortgage or real estate transaction within the past 10 years
Second Lien Modification Program
Homeowners who received permanent mortgage modifications through HAMP are also automatically eligible to modify any second liens on their homes through the companion Second Lien Modification Program. Individuals may be able to modify the lien or reduce the principal on a second mortgage if the servicer of the loan is a Second Lien Modification Program participant.
Homeowners may eligible to modify a second mortgage if they meet the following criteria:
- Their first mortgage was modified under HAMP.
- They have never missed three modified monthly payments in a row.
- They owe more than $5,000 on the second mortgage.
- The second-mortgage monthly payment is more than $100.
- They have not been convicted of felony theft, larceny, fraud or forgery, tax evasion or money laundering in connection with a mortgage or real estate transaction within the past 10 years.
As of April, 2011, 17,000 homeowners received lowered monthly payments on their second liens through the Second Lien Modification Program. However, modification of a first or second mortgage is not a possibility for all homeowners. For people overwhelmed with debt who cannot keep up with their mortgage payments, other options such as filing for bankruptcy may be available.
To learn more about your options for keeping your home and managing debt, contact a knowledgeable bankruptcy attorney to help you find the right debt-relief solution for you.