HAMP: Is It Right For You?

HAMPYes, we’re back with another lesson in acronyms for homeowners. We’re thinking especially of ZipRealty clients who responded to our customer survey, the results of which we posted for you last week. A key feature of the survey was the fact many of our buyers had homes that had depreciated in value—yet they didn’t feel “worse off” because they regarded the home as a long term investment, and an investment that yields more than just monetary return. Yet there is help for homeowners whose homes have lost value, or who’ve suffered from the economy’s malaise and are struggling to make their house payments.

With these folks in mind, today we conquer HAMP, the Home Affordable Modification Program. HAMP was started by the Obama Administration to help struggling American homeowners stay in their homes by modifying the amount of their monthly house payment.  This program is only open to people who can prove significant financial hardship (such as unemployment).

The current version of HAMP, effective as of late June of 2012, is more inclusive than its former version. Now, the program can help an expanded cross-section of homeowners, including:

  • Homeowners who are applying for a modification on a home that is not their primary residence, but the property is currently rented or the homeowner intends to rent it.
  • Homeowners who previously did not qualify for HAMP because their debt-to-income ratio was 31% or lower.
  • Homeowners who previously received a HAMP trial period plan, but defaulted in their trial payments.
  • Homeowners who previously received a HAMP permanent modification, but defaulted in their payments, therefore losing good standing.

Restrictions on HAMP

There are some rules for applying to HAMP. According to the Making Home Affordable official website, in order to apply a homeowner must meet the following qualifications.

  • You obtained your mortgage on or before January 1, 2009.
  • You owe up to $729,750 on your primary residence or single unit rental property
  • You owe up to $934,200 on a 2-unit rental property; $1,129,250 on a 3-unit rental property; or $1,403,400 on a 4-unit rental property
  • The property has not been condemned
  • You have a financial hardship and are either delinquent or in danger of falling behind on your mortgage payments (non-owner occupants must be delinquent in order to qualify).
  • You have sufficient, documented income to support a modified payment.
  • You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.

How Is This Different from HARP 2.0?

As we discussed when we wrote about HARP 2.0 last week, this program too is part of the Obama Administration’s response to the nation’s real estate melt down and subsequent foreclosure crisis. But HARP targets specifically creditworthy homeowners whose mortgages are underwater (meaning the amount of the mortgage is greater than the home's current value) , allowing them to refinance to the lowest available mortgage rates. Unlike HAMP, with HARP you don't have to show financial hardship and you don’t have to be at risk for foreclosure.  You just have to have Freddie or Fanny mortgage on a house that is worth less than you paid for it, and you can possibly refinance to a better interest rate and lower payment to offset your losses.

These are just two programs offered by the Feds to help you stay in and enjoy your home. For more help, contact your mortgage broker, credit union, bank or visit one of these websites below.

Additional Resources

Anna Marie Erwert writes from both the renter and new buyer perspective, having (finally) achieved both statuses. She focuses on national real estate trends, specializing in the San Francisco Bay Area and Pacific Northwest. Follow Anna on Twitter: @AnnaMarieErwert