The Home Affordable Modification Program (HAMP), one of the Obama administration’s foreclosure prevention programs is extended until December 31, 2013.
The extension of one of the administration’s foreclosure prevention programs was announced last Friday by Housing and Urban Development (HUD) Secretary Shaun Donovan, Assistant Treasury Secretary Tim Massad, and White House National Economic Council Director Gene Sperling.
HAMP was supposed to end on December 31, 2012.
HUD Public Affairs reported that HAMP has helped more than 900,000 struggling families permanently modify their mortgage loans, providing them with a median savings of more than $500 every month.
But what is HAMP? HAMP is one of the programs of the U.S. government that aims to help homeowners who are at risk of foreclosure and otherwise struggling with their monthly mortgage payments.
“The typical HAMP modification results in a 40 percent drop in a monthly mortgage payment. Eighteen percent of HAMP homeowners reduce their payments by $1,000 or more,” HUD says.
In addition to extending the period of HAMP, eligibility of HAMP has been extended as well. In a press statement, the HUD Public Affairs say these additional changes to HAMP include:
• Ensuring that borrowers struggling to make ends meet because of debt beyond their mortgage can participate. Many homeowners who have an affordable first mortgage payment struggle beneath the weight of other debt such as second liens and medical bills. Recognizing that many homeowners in this situation are still struggling to make ends meet, the program is being expanded to offer another evaluation opportunity with more flexible debt-to-income criteria to expand modification assistance to borrowers with higher levels of secondary debt who otherwise meet program requirements.
• Preventing additional foreclosures to support renters and stabilize communities. Treasury will expand eligibility to include properties that are currently occupied by a tenant as well as vacant properties which the borrower intends to rent.
In order to encourage investors to consider or expand use of principal reduction modifications, HUD announced that the Obama administration will:
• Triple the incentives provided to investors who agree to reduce principal for borrowers: To increase the amount of principal that is reduced, Treasury will triple incentives to investors, paying from 18 to 63 cents on the dollar, depending on the degree of change in the loan-to-value ratio.
• Offer principal reduction incentives for loans insured or owned by the GSEs. HAMP borrowers who have loans owned or guaranteed by Fannie Mae or Freddie Mac (the GSEs) do not currently benefit from principal reduction loan modifications. To encourage the GSEs to offer this assistance to underwater borrowers, Treasury has notified the GSE’s regulator, the Federal Housing Finance Agency (FHFA), that it will pay principal reduction incentives to Fannie Mae or Freddie Mac if they allow servicers to forgive principal in conjunction with a HAMP modification.
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