Different Types of Loan Modifications Explained:
If you're looking to modify the original terms of your loan agreement with your lender, then a loan modification is a viable option for Florida homeowners who are current, past due, in default or already in foreclosure.
There are several different types of loan modifications available and in this section of our website, we'll go over them.
HAMP: Home Affordable Mortgage Program:
HAMP was designed to make homes affordable to anyone who was struggling to make their monthly loan payments by enabling them to modify the original terms of the loan, usually with a lower interest rate or a longer payment term. HAMP does require a trial period, meaning a borrower must make payments for three months under the trial period in order to make the modification permanent. Some of these restructuring programs can be of great benefit to the homeowner while also helping to minimize increasing defaults.
Unfortunately, statistics show that HAMP has not performed as well as anticipated:
- Over 1.5 million trial periods were cancelled as of October 2010. Cancellations occur when a borrower defaults on the new terms, if the borrower was ineligible, or if the appropriate documents were not received.
- As a result, nearly half of all cancelled trial loans were modified through a private lender instead, however, long-term results from these types of private lender are somewhat controversial. In these situations, the lender programs tend to have increasingly adjusted payment rates which will reflect a short term savings, however this comes at the expense of a longer term debt and quite often additional fees and other expenses may be added to the basis of the loan.
- There has been a consistent backlog of delinquent mortgages in need of attention, and the backlog continues to increase.
Effective June 1, 2012, the Obama Administration expanded the population of homeowners that may be eligible for HAMP in an effort to continue providing solutions to the housing crisis.
* HAMP was set to expire December 2013 but has now been extended through December 31, 2015.
How do I know if I am eligible for HAMP under the new guidelines?
- If you are a homeowner who is applying for a modification on a home that is not your primary residence, but the property is currently rented or you intend to rent it
- If you are a homeowner who did not previously qualify for HAMP because your debt-to-income ratio was 31% or lower.
- If you are a homeowner who previously received a HAMP trial plan but defaulted in your trial payments
- If you are a homeowner who previously received a HAMP permanent modification but defaulted in your payments and lost good standing.
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HARP: Home Affordable Refinance Program:
HARP was created by the U.S. federal government in an effort to assist homeowners who are current on their mortgage, but are unable to refinance on their loan due to a decrease in the property value, leaving them "underwater".
This program is also intended to help homeowners who are in an exotic or adjustable rate mortgage or those who are facing an increase in their monthly payments.
If you have no income and cannot make any mortgage payment, you will not qualify for assistance through HARP.
How do I know if I am eligible for HARP?
There are three basic requirements in order for you to be eligible for HARP:
- You must own a one to four unit home.
- Your mortgage loan must be owned or guaranteed by Fannie Mae or Freddie Mac
- you can visit the loan lookup tools at Freddie Mac or Fannie Mae to check.
- The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
- You must be current on your mortgage payments.
- current means you have No Late Payments reported on your credit report in the last 12 months.
- The current loan to value (LTV) ratio must be greater than 80%.
- The mortgage cannot have been refinanced under HARP previously unless its a Fannie Mae loan that was refinanced under HARP from March-May 2009.
HAFA: Home Affordable Foreclosure Alternatives
If you can no longer afford your home but wish to avoid the negative effects a foreclosure proceeding can have, then HAFA might be right for you.
HAFA was designed to offer homeowners, their mortgage servicers and investors an incentive for completing a short sale or deed-in-lieu of foreclosure. With HAFA, homeowners are given options to help them leave their home and transition into more affordable housing while alleviating the mortgage debt they owe.
Benefits of HAFA that make the transition as favorable as possible:
- Receive free advice from HUD-approved housing counselors or licensed real estate professionals.
- Unlike a conventional short sale, a HAFA short sale will completely release you from your mortgage debt after the property is sold, meaning you will not be held responsible for the amount that falls "short" of the amount you still owe. The servicer guarantees to waive the deficiency.
- The mortgage company works with you to determine an acceptable sale price.
- The HAFA program is easier on your credit score than a conventional short sale or foreclosure.
- HAFA may provide up to $3,000 for relocation assistance for those who qualify at time of closing.
How do I qualify for HAFA?
- If you have a documented financial hardship.
- If you have not purchased a new home within the last 12 months.
- If you do not qualify for a trial mortgage modification under HAMP.
- Your first mortgage must be less than $729,750.
- Your mortgage was obtained on or before January 1, 2009.
- You must not have been convicted within the last 10 years of felony larceny, theft, fraud, forgery, money laundering or tax evasion in connection with a mortgage or real estate transaction.
- If you were under a trial mortgage modification under HAMP and failed to complete the trial period.
- If you missed at least two consecutive payments during your modification period.
- If you request a short sale or deed-in-lieu of foreclosure.
The HAFA program is available for mortgages that are owned or guaranteed by Fannie Mae and Freddie Mac or if the mortgage is serviced by one of over 100 HAMP participating mortgage servicers.
Other types of Loan Modification programs:
Due to the increasing number of people facing foreclosure and in an effort to attempt to help more homeowners avoid foreclosure, Fannie Mae and the U.S. government have created a few additional add-on programs to HAMP which include Alt Mod, Mod 24 and 2MP.
Both Alt Mod and Mod 24 lower the borrower's mortgage ratio (the ratio is the monthly mortgage payment divided by monthly income) and consider other financial criteria to qualify applicants.
The 2MP program is specifically for borrowers who have a second mortgage and are also in the HAMP program in order to allow the payment on the second mortgage to be adjusted lower as well.
HHF: Hardest Hit Fund:
Additional government dollars have been put into work by the Obama Administration in states that have been the hardest hit by foreclosures and property devaluations. The intention is for the money to go to helping families who are ineligible for HAMP in order to avoid foreclosure in states such as Florida - as well as Arizona, California, Nevada and Michigan.
The program has undergone an expansion over the years since inception and additional states have been included while over $7 billion dollars have been budgeted already. For more information on the Hardest Hit Fund, you can call us today for a free consultation or visit FinancialStability.gov for more.
EHLP: Emergency Homeowners Loan Program:
Designed to complement the HHH (Hardest Hit Fund) by providing assistance to homeowners who are located in hard hit local areas that may not be included in the hardest hit target states, EHLP has become an option to help those people as well.
Offering a zero percent interest, non-recourse, subordinate loans for up to $50,000, EHLP will assist eligible borrowers with payments on their mortgage principal, interest, mortgage insurance, taxes and hazard insurance for up to 24 months or 2 years.
How do I become eligible for EHLP?
- You must be a homeowner who is at least 3 months behind in your payments and you must also have a reasonable likelihood of being able to resume repayment of your mortgage payments and any other related housing expenses within 24 months or 2 years.
- As a homeowner, the property must also be your principal residence, and to be eligible you are not permitted to own a second home.
- You must also be able to provide evidence or a good payment record prior to the event which resulted in a reduction of income.
2013 Streamlined Loan Modification Program
On March 27, 2013 the Federal Housing Finance Agency announced a New Streamlined Modification Initiative in a news release which is designed to help further minimize losses while also helping troubled borrowers with yet another option to help them avoid foreclosure and stay in their homes. The program isn't scheduled to begin until July 1, 2013.
Once that date passes, servicers will be required to offer eligible borrowers who are at least 90 days delinquent on their mortgage an easy way to lower their monthly payments and modify their mortgage without requiring any financial or hardship documentation.
Administrative barriers once associated with document collection and evaluation can now be eliminated with the new Streamlined Modification Initiative. Borrowers who are eligible to participate will be required to demonstrate an ability and willingness to pay by making just three trial payments in a row on time. After that occurs, the mortgage will be permanently modified.
Additional benefits may be awarded to homeowners who continue to work with their servicer and homeowners are encouraged to do so in order to evaluate all available options to prevent foreclosure.
Regardless of what your situation is, if you're facing difficulties maintaining your mortgage payments and you need assistance to avoid foreclosure in Florida, the Tampa attorneys at Fernandez Law Group can help guide you through the loan modification process as well as provide education and assistance to help you with other options including short sales and other foreclosure defense remedies.
Call us today at 813-489-3222 for a FREE consultation.
Additional Foreclosure Defense Information:
Additional information about Loan Modifications:
Additional information on Short Sales:
Content authored by Gaston Fernandez
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