Home Affordable Modification Program: Overview

The Home Affordable Modification Program is designed to help as many as 3 to 4 million financially struggling homeowners avoid foreclosure by modifying loans to a level that is affordable for borrowers now and sustainable over the long term. The program provides clear and consistent loan modification guidelines that the entire mortgage industry can use.

Borrower eligibility is based on meeting specific criteria To qualify under the new guidelines:

* The property must be the homeowner’s principal residence.
* The homeowner is delinquent on the mortgage or default looks likely. Homeowner is insolvent.
* The loan was made before Jan. 1 this year and is less than $729,750
* The borrowers’ total monthly mortgage payment exceeds 31 percent of their before-tax income.

After determining a borrower's eligibility, a servicer will take a series of steps to adjust the monthly mortgage payment to 31% of a borrower's total pretax monthly income:

First, reduce the interest rate to as low as 2%,
Next, if necessary, extend the loan term to 40 years,
Finally, if necessary, forbear (defer) a portion of the principal until the loan is paid off and waive interest on the deferred amount.

Note: Servicers may elect to forgive principal under HAMP on a stand alone basis or before any modification step in order to achieve the target monthly mortgage payment.

If you have further questions or need any of the following documentation: