If you are facing severe financial hardships, paying your mortgage can quickly become impossible. However, foreclosure is not your only option. The Home Affordable Modification
Program, or HAMP, was created to help homeowners like you stay in their homes. Through this program, loan modifications such as refinancing, extending the term of a mortgage, or lowering interest rates for struggling homeowners.
Understanding HAMP
HAMP was established by the government in 2009 in response to the nationwide housing crisis. Loan modifications provide a way for homeowners mortgage costs to return to an affordable rate. Under HAMP, monthly mortgage payments should not be more than 31 percent of your total income. Even if your lender does not officially participate with HAMP, they might offer their own loan modification programs.
HAMP Eligibility
Although HAMP can be a lifesaver for some homeowners, not everyone qualifies for this type of loan modification. Applicants must meet the following qualifications:
- The mortgage must have been finalized by January 1, 2009.
- Homeowners can owe no more than $729,750 on their primary residence.
- Applicants must have proof that they will be able to pay the modified mortgage with their current income if the modification is approved.
- Homeowners must be currently experiencing a financial hardship from a situation such as an illness, divorce or loss of employment.
Applying for a Loan Modification
Completing the application process for a loan modification requires quite a bit of documentation and paperwork. The process can vary based on your lender, but you will generally be required to provide income documentation for everyone in your household, recent tax returns, bank account and loan statements and a list of your current assets. You will also need to write a letter explaining the details of your financial hardship.
After you have compiled all of your information and documentation, contact your mortgage lender and let them know you are interested in a loan modification. It’s important to know that you do not have to be late on payments to apply for a modification. Instead, you just need to show that your financial hardship will keep you from being able to make your mortgage payments in the future.
Credit Concerns
Many homeowners are concerned with the impact on their credit scores if they are approved for a loan modification. However, unlike a foreclosure, a loan modification should not have a negative impact on your credit score. HAMP was designed so that lenders could report the modification in a way that does not harm a person’s credit rating.
Other Options
If your application for a loan modification is rejected, but you still can’t make your mortgage payments, it’s important to consider your other options. Since foreclosure has such a negative impact on both your credit score and your family’s living arrangements, it should only be used as a last resort.
Short Sale
A short sale is an excellent option for some homeowners who owe more on their home than it is currently worth. In a short sale, the lender and seller agree to a lower asking price, so the seller does not owe anything once their home is sold.
Forbearance
If you expect that your financial situation will improve over the next few months, apply for a forbearance from your lender. This means that your payments will be reduced or put on hold for a short period of time.
Homeowners who are in financial trouble have plenty of options, but sorting through all of the information can be overwhelming. If you are considering a loan modification, having the right information and assistance is vital. Our attorneys can provide the guidance you need to make a wise decision.
How we can help you
Pursuing a loan modification could be a great way to relieve financial pressure and reduce stress & anxiety. Loan modifications require specialized legal knowledge. For the best results, it is recommended that you hire an experienced loan modification attorney.
Is Your Home About To Be Foreclosed On In Virginia, Maryland or Washington D.C.?
If you are concerned that you will lose your home you need to speak with an experienced foreclosure defense lawyer as soon as possible. Please contact us online or call our Vienna, Virgnia office directly at 703.991.7978 or our Rockville, Maryland office at 301.637.5392 to schedule your case consultation.
