Home Affordable Modification Program (HAMP)
FHA loan modification was a voluntary program that began in the summer of 2009. At the time of its issuance, communities throughout the United States were experiencing a steady and increasing rate of foreclosures. Not only did this damage the nation’s economy and provide instability to the housing market, but foreclosures were often devastating for homeowners that would lose their homes, as well as neighborhoods that would experience a growth in vacant and abandoned houses.
The HAMP program was a way for FHA-insured borrowers who met qualification requirements to potentially learn how to avoid foreclosure. Through this program, the homeowner’s mortgage would be permanently altered in order to reduce monthly mortgage payments through the use of a partial claim. Those claims would then be deferred to the repayment of mortgage principal in an interest-free subordinate mortgage that would begin after the first mortgage had been repaid.
Who was eligible for a HAMP loan?
In order to be HAMP-eligible, you must have been a homeowner that was struggling to avoid foreclosure. Homeowners were required to show documented financial hardship in order to be considered eligible, and must have been capable of making new monthly mortgage payments after a modification was instated. In order to test whether an applicant remained eligible for the program and was able to make the modified payments, borrowers were given a trial period.
What was the HAMP program end date?
Unfortunately, the HAMP mortgage program has already run its course, and the program ended on Dec. 31, 2016. In March of 2017, the FHA and HUD reported the success of the program with over 2.8 million homeowners having received permanent loan modifications. During the length of the program, private lenders had the option of participating in the program, or refusing to modify loans as the program was considered to be voluntary.
However, following HAMP guidelines, many lenders created programs that were similar to the one offered by the FHA. While HAMP may have ended, many of these programs still exist, but you will need to consult with your lender in order to see whether or not your lender offers one of these programs.
How the FHA Home Affordable Modification Program Worked
FHA HAMP offered homeowners the opportunity to reduce monthly mortgage payments in order to avoid foreclosure. It provided immediate savings to homeowners who experienced increases in household expenses or reductions in income that resulted in an inability to meet mortgage payments.
The HAMP program achieved these lower mortgage payments by modifying existing mortgages while following a structured protocol that included many of the following:
- Adjusting the interest rate on the existing mortgage
- Extending the term length of the mortgage
- Forbearing and/or forgiving principal
When reviewing a modification agreement, it is important to review the details of the agreement carefully, with your lender of with your housing counselor, if you have one. Failing to make modified payments generally resulted in a loss of eligibility for the program, and a home could then still be foreclosed upon.
Understanding the HAMP Program Trial Period
When HAMP program benefits were provided to struggling homeowners, most lenders would put the homeowner on a trial, such as a three month trial. These trial periods would allow the homeowner the opportunity to demonstrate whether or not they would be capable of making the modified mortgage payments in a timely manner each month.
If a borrower was successful in the trial period, the mortgage company would agree to execute the official modification agreement. If unsuccessful, the borrower would no longer be eligible for the program, and could still face foreclosure due to nonpayment or insufficient payment.
Finding Aid Outside of HAMP
While HAMP has ended, it is worth knowing that there are other mitigation programs that are available through the HUD and FHA. As mentioned previously, your mortgage lender may also provide assistance that are similar to the one that had been provided by the FHA. Many of these programs still exist across the United States. Download our informative guide to read more about HUD- and FHA-approved home programs.
The HAMP program is not the only mitigation program available, and it may not be the only program offered that will help you to avoid foreclosure. If find yourself potentially facing foreclosure for your home, you may also want to consider contacting an HUD-approved housing counseling agency in order to review your options – without any cost to you.
To learn more about the Home Affordable Modification Program, as well as other mitigation programs that may provide you with assistance, download our comprehensive guide. This guide will provide you with an in depth look about this program, and many other FHA-provided programs.