Obama’s Foreclosure Prevention Plan - Home Affordable Modification Program (HAMP)
( It is also commonly called HAMP Obama Program, HAMP modification, HAMP Home Loans)
HAMP benefits: what the government program can do for mortgage owners that qualify in easy to understand terms.
- It starts your mortgage rate off at around 2 percent on the first mortgage for 5 years.
- Then increases 1 percent every year after until it caps around 5 to 5.25 percent estimate.
- The mortgage rate cap is based on Freddie Mac Primary Mortgage Market Survey.
- As long as you stay current on your payments in the HAMP (over 90 days), you can get up to $1,000 each year paid on the principal for five years, subject to a de minimis threshold (it will not pay of more then what you owe on the first mortgage).
- After 90 days of paying on time the government will review your 2nd mortgage, may qualify you for one or more possibilities listed below.
- If you have a 2nd mortgage it will attempt to get you a 1 or 2 percent for the first five years, then step up to the current rate of the 1st mortgage.
- As long as the you stay current on your payments in the HAMP (over 90 days), get up to $250 each year paid on the 2nd mortgage principal for five years, subject to a de minimis threshold (it will not pay of more then what you owe on the 2nd mortgage).
- In some cases pay the 2nd mortgage off off completely at no cost to you.
- The laws and procedures for this program regarding the 2nd mortgage has been changed several times from the government, and may change again at any time. So the examples listed above are only possibilities not guarantees.
1. Unemployed, disability, retired are all ok!
2. Lates on Mortgage? - (You do not need to be late on your mortgage to qualify!)
3. Credit - does not matter
4. You qualify on your gross earnings, not net income.
5. Higher then normal back-end debt like utilities, medical, insurance, food, clothing in most cases will not disqualify you.
6. Already did a Traditional Loan Modification - We can still get you into the HAMP.
7. $5000 for your principal can be paid off on your 1st mortgage.
8. You usually start around 2% percent on your 1st mortgage for 5 years, with a 1 percent increase every year after until it caps around 5 to 5.25 percent estimate.
9. 2nd Mortgage will usually be reduced to 1 % or 2 % for 5 years then steps up to match 1st mortgage or in some cases just pays it off at no cost to you.
Types of Property:
- Primary - Owner Occupied
- Manufactured Homes (fixed to property)
- No Investor - Owner
- No Vacant or Condemned Properties
1. You can only apply for it 1 time - if you fail then you can not reapply! - That is why it is important to have a professional review and submit your file for approval. You only get one shot at this and you need it to be the best shot you can take, and the best why to do that is with us!
2. You must make your first 3 payments on time. - You are considered to be in probation during the first 3 months, and if you do not make your payments then they will move you immediately into foreclosure.
3. You income and debt will be verified by the government - do not fudge about your income.
We have helped many home owners like yourself qualify for the Obama HAMP.
Please let us help you today get into this great program while it is still available.
Understanding the DTI Ratios under Obama’s Foreclosure Prevention Plan - Obama HAMP Program
Here is a sample of some HAMP modification completed for you to review.. [examples]
Front-end DTI - indicates the percentage of income that goes toward housing costs, which for renters is the rent amount and for homeowners is PITI (PITI includes mortgage principal and interest, mortgage insurance premium [when applicable], hazard insurance premium, property taxes, and homeowners association dues [when applicable]).
Back-end DTI - indicates the percentage of income that goes toward paying all recurring debt payments, including those covered by the first DTI, and other debts such as credit card payments, car loan payments, student loan payments, child support payments, alimony payments, and legal judgments.
The Obama (HAMP) Home Affordable Modification Program accounts for both front-end and back-end DTI ratios.
The program will match further reductions in monthly payments dollar-for-dollar, from 38% down to 31% debt-to-income ratio for the borrower.
To ensure long-term affordability, the modified payments will be kept in place for five years and the loan rate will be capped for the life of the loan. After five years, the interest rate can be gradually stepped-up by 1% per year to the conforming loan survey rate in place at the time of the modification.
To reach the target affordability level of 31%, interest payments will first be reduced down to as low as 2%. If at that rate the debt to income level is still over 31%, lenders then extend the term or amortization period up to 40 years, and finally forbear principal at no interest, until the payment is reduced to the 31% target.
Borrowers who qualify for a modification but would have a post-modification back-end DTI ratio greater than or equal to 55%, will be provided with a letter stating that they are required to work with a HUD Approved Housing Counseling Agency (Hud-approved Counselor). Which means you must go to a free Money Debt Management class in your area. The modification will not take effect until they provide a signed statement indicating that they will obtain counseling. To get a list of HUD Approved Counselors in your area click [ here ].
How the Second Mortgage Lien Program Works
The Second Lien Program is intended to work in tandem with a HAMP modification to a borrower’s first lien mortgage loan. When a HAMP modification is initiated on the first lien mortgage loan, the servicer automatically must reduce payments on the related second lien mortgage loan in accordance with the protocol set out in the Second Lien Program. The protocol includes a reduction in the second lien mortgage loan’s interest rate to either 1 or 2 percent per annum (depending on whether the loan is an amortizing or interest-only loan) for five years, after which the interest rate will step up, generally to the then-current rate on the related modified first lien mortgage loan. In addition, the second mortgage loan must be re-amortized (generally to match the amortization schedule of the modified first lien mortgage loan) and, if there is a principal forbearance on the first lien mortgage loan, then there must be a proportionate amount of principal forbearance on the second lien mortgage loan.
The Second Lien Program has a “pay-for-success” incentive structure similar to that of HAMP: the participating servicer is eligible to receive a $500 up-front incentive payment for each successful second lien modification and continued “success” payments of $250 per year (up to three years) so long as the modified loan remains current. In addition, the borrower can receive “success” payments of $250 per year for up to five years, with those payments being applied to reduce the balance of the related first lien mortgage loan. Investors also receive incentive payments in connection with reduction of the interest rate on the modified second lien mortgage loan, with the amount of the incentive payment depending on the type of second lien mortgage and the rate adjustment.
As an alternative to modifying the second lien mortgage loan, the related investor may choose to extinguish its loan. The investor will be paid an incentive payment of 3 cents for each dollar of the principal amount extinguished for loans more than 180 days past due. For second lien mortgage loans less than 180 days past due, the incentive payment ranges from 4 cents to 12 cents per dollar of principal based on the back-end (post-modification) debt-to-income and second lien loan-to-value ratios of the loan.
Question: When does the Fixed Rate apply on the HAMP?
This is the best way I can answer your question.
The interest rate cap is the Freddie Mac Weekly Primary Mortgage Market Survey (PMMS) Rate for 30-year fixed at the time the modification agreement is prepared.
As of November 12 09, the rate is 4.91%, if your modified interest rate at this point is higher than the cap, so you have nothing to worry about.
Your interest rate should never go up.
If it is below the cap, like you got 2 percent - then it is 2 percent for the first 5 years, then goes up 1 point each year until it reaches the cap, in which it was at the time the modification agreement is prepared!
To get Freddie Mac weekly rate go to this link, then click "2009 Weekly Mortgage Rates data"
Freddie Mac's Weekly Primary Mortgage Market Survey
Question: How do they determine the interest rate that the client starts with in general for the HAMP?
Here are HAMP guidelines:
Determine how to reduce the interest rate.
If the loan is a fixed rate mortgage or an adjustable-rate mortgage, then the starting interest rate is the current interest rate.
If the loan is a Reset ARM, the starting interest rate is the Reset Interest Rate.
Reduce the starting interest rate in increments of .125 percent to get as close as possible to the target monthly mortgage payment ratio (.31 FDTI gross). The interest rate floor in all cases is 2.0 percent.
- If the resulting rate is below the Interest Rate Cap, this reduced rate will be in effect for the first five years followed by annual increases of one percent per year (or such lesser amount as may be needed) until the interest rate reaches the Interest Rate Cap, at which time it will be fixed for the remaining loan term.
- If the resulting rate exceeds the Interest Rate Cap, then that rate is the permanent rate.
The "Interest Rate Cap" is the Freddie Mac Weekly Primary Mortgage Market Survey (PMMS) Rate for 30-year fixed rate conforming loans, rounded to the nearest 0.125 percent, as of the date that the Agreement is prepared.
Documentation needed for modification:
Proof of Income (pay-stubs for Borrower, Co-Borrower, all Contributors)
Financial Analysis Statement
Insurance Dec Page
Tax Returns (2 years)
Designated Agent Authorization
Business Bank Statements
Letter of Chapter 7 BK Reaffirmation
Documentation Needed for Basic Forensic Audit (included at no additional cost)
Truth - in - Lending Statement (both the initial TIL and Final TIL)
1003 - Uniform Residential Loan Application
Note (Also called a Promissory Note, a Fixed Rate Note, and an Adjustable Rate Note)
Adjustable Rate Note Rider (if applicable)
Good Faith Estimate
Hud-1 Settlement Statement (May say Closing Statement)
Pre-Payment Rider (if Applicable)
Date Loan Received by Lender (if Available)
Certificate of Insurance (if Available)
Comment Letter from Lender (if Available)
* We will expect these documents from you within (7) days of signing the agreement for the HAMP or Loan Modification.
Please let us help you today get into one of these great programs, while they are still available.