The Facts of HAMP and Home Loan Modification

These days if you aren’t hearing about foreclosure and home loan modifications, then you aren’t listening. According to RealtyTrac there were 343,638 foreclosures filed against properties in September 2009, a 4 percent decrease from August but an increase of 29 percent increase from September 2008. September was the third highest monthly total since the RealtyTrac report began in January 2005, behind only July and August of 2009.

It can be safely said at this point that things aren’t looking that great. Enter President Obama’s Home Affordable Plan: HAMP (Home Affordable Modification Program) is a $75 billion initiative intended to help people afford their mortgages and stay in their homes. One program it funds is a home loan modification program. Lenders are encouraged to assist borrowers who are having trouble keeping up with their monthly mortgage payments.

There are some things that need to be made clear before the homeowner thinks that the perfect solution has been found. The plan put foreword by President Obama works under the idea that homeowners will continue to pay off their loans as long as they can afford them. To do this the plan concerns itself with a lower monthly payment, and not the value of the house itself.

To qualify for a HAMP funded home loan modification you must have a mortgage payment that is 31% of the gross monthly income or more. When figuring the mortgage payment, the property insurance, taxes on the property and any homeowner association dues you pay can be included in this figure.

Loan processors are receiving $1,000 per home loan modification completed and will receive another $1,000 yearly for three years provide the homeowner continues to make payments on the loan.  Homeowners also qualify to have $1,000 taken from the initial principle of their loan every year for five years provided they make their payments on time.

President Obama’s home loan modification plan is not going to do a thing for real estate speculators who bought houses during the markets upsurge in the hopes of flipping them. This plan is intended for responsible homeowners who were trapped by the current real estate and economic depressions. Only homes that are occupied by the owners as the primary residence having an outstanding principal balance of less than $730,000 will qualify

To determine if a loan is qualifies home loan modification the loan servicer performs what is called a NET PRESENT VALUE TEST. This test compares the probable cash flow the mortgage would generate were it to be modified as opposed to the probable cash flow it would generate were it not modified.

Obama’s home loan modification plan talks about the topic of second loans like home equity loans and lines of credit by offering special incentives to eliminate them.  As of yet there hasn’t been specific information released on these 2^nd mortgages.

It may also benefit you to consult with an attorney or a professional home loan modification specialist for any questions you might have.

To learn more about home loan modification visit Legal Loan Bailout.