Obama Looks to Expand Home Affordable Modification Program (H.A.M.P) Guidelines
Looking to offer additional resources for those struggling with mortgage payments, the Obama Administration recently announced plans to expand the guidelines of the Home Affordable Modification Program, or H.A.M.P as its commonly referred to, in the coming months. With more than eleven million (11,000,000) homeowners considered "underwater", or owing more than their home is worth, the administration appears eager to foster assistance for this growing class. This of course is set against the backdrop of a 4th quarter which saw foreclosures rise 9% to 128,859 and more than 38,000 homeowners sell their homes through short sales.
To date, critics of the program note that less than 2% of modifications involved principal balance reductions, and no provisions in the program provide relief for payments on second mortgages. This expansion looks to make long term home retention more likely by addressing those criticisms. Principal balance reduction would be available for HAMP-eligible borrowers who owe more than 115 % of their home's current value. While lowering principal balances would still remain optional, servicers consider an investors' best financial interest, and the expanded guidelines offer financial incentives for servicers to write down principal.
Additionally, H.A.M.P will now include a new "Second Lien Program" which will require modifications on second liens if the first lien is modified through H.A.M.P and the second lien servicer participates in the Second Lien Program. At the same time, when a first mortgage is in the "trial period" of review, the servicer will be required to determine if the homeowner is eligible to refinance under the Hope for Homeowners program and, if eligible, offer the refinance. It is worth noting however, that the Second Lien program is a voluntary and parallel program, which servicers must choose to participate in. This means that a servicer may decide to participate in the H.A.MP. without electing to participate in the Second Lien Program, or choose to participate in neither. Other changes proposed in the H.A.M.P. expansion include: forbearance of mortgage payments for the unemployed and additional relocation assistance towards more affordable housing when a modification is not possible.
Overall it appears the expansion should offer some relief to homeowners previously ineligible. The final expansion guidelines will be released later this year. As an attorney who frequently works with the banks on these matters however, I believe the expansion misses the mark on the most serious problem to date. It is simply too difficult and time consuming for the average homeowner to negotiate with their mortgage servicer. Far too many people are getting frustrated and/or denied in the process, as evidenced by the fact that there have been roughly only 170,000 permanent modifications to date. Hold times to speak with servicers can be in excess of thirty minutes, and the entire modification process can take more than six months. Additionally, consistent weekly communication with the servicer is critical to ensure that a file's information is current, accurate and that the file is moving forward.
As the options for homeowners struggling with mortgage payments expand and the guidelines for assistance continue to change, it will become even more important to consult with a qualified attorney who can review your finances and provide options. I have assisted many homeowners in restructuring and permanently modifying their mortgages and cannot overstate the importance of thoroughly reviewing finances and structuring a plan for financial recovery before anything is submitted to the bank. The truth is that regardless of how H.A.M.P continues to evolve or how many options it provides, no option will prove as useful as seeking assistance at the first signs of trouble. If you or someone you know is struggling with mortgage payments, please ask to schedule a free consultation with our office.
-Andrew R. Martignetti, Esq.
Information in the above article is for educational purposes only and does not create an attorney-client relationship. You should not construe this to be a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel.
