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Are you eligible for mortgage modification under HAMP?

by Dorota Trzeciecka on June 15th, 2010

Whether you are a homeowner in foreclosure, or you are facing an imminent default on your mortgage, the first thing you want to know is whether you can qualify for modification of your mortgage and keep your home.   And not just any modification; you want to know if you can qualify for Home Affordable Modification Program, or HAMP for short.  It is a federal government program designed to help homeowners save their homes from foreclosure by modifying the terms of an existing mortgage loan to a lower, more affordable payment.   The modification under the program is not guaranteed or automatic — you have to be both eligible and qualified for HAMP modification.  On their face, these two terms, eligible and qualified, are synonymous.  But as you will see, in this context they have a different meaning.   

How do you know if you are eligible for HAMP modification?  You are eligible for HAMP if:

  • the mortgage loan that you want to modify is on the home that is your primary residence;
  • the maximum principal balance on your mortgage loan is not greater than $729,750;
  • your loan is in default or at risk of imminent default;
  • the combined mortgage payment, taxes, insurance, and HOA dues payments are more than 31% of your gross income;
  • you obtained your current mortgage before January 1, 2009;
  • you cannot afford the mortgage payments because you had a significant increase in your mortgage payment or reduction in your income since you got your current loan OR you have suffered a hardship that has increased your expenses (like medical bills).

If you do not meet all these eligibility requirements, it does not mean that you are not eligible for a modification of your mortgage loan.  It just means that you are not eligible for HAMP modification.  There may be similar modification programs offered by your mortgage servicer, for which you may be eligible.   

HAMP modification has definite advantages, though.   It comes with principal forbearance — a portion of the principal of your loan that is set aside as non-interest bearing balloon that will be paid upon sale, refinance, or the maturity of the loan.   And, you may also get financial incentives from the government, if you make your payments on time under the modified mortgage loan.  

Is my loan Fannie or Freddie?

Not all loans are eligible for HAMP modification.  When requesting HAMP modification, you want to find out whether your loan is a Freddie Mac or a Fannie Mae loan, or a so called GSE (Government Sponsored Entity) loan.   If it is, it must be considered for HAMP modification.  If it isn’t, your lender may have chosen to participate in HAMP.  You can check if your lender is a participating lender by going to the HAMP website.   All the other eligibility requirements will still apply.  

Do you qualify for HAMP modification?

If you meet all the above eligibility criteria for HAMP, the servicer will then determine if you qualify for HAMP modification.  As you will see in my next blog post in this series, determination of qualification is a multiple step process.

From → Foreclosure