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Understanding the Government's Home Affordable Modification Program (HAMP)

HAMP is a modification program with very specific requirements. It was introduced by the Obama administration to help prevent avoidable foreclosures. HAMP is one tool of many available to help borrowers who are in danger of losing their homes.

As you read through the information on this page, keep in mind that loan modifications are complicated things. The company that is modifying your loan is obligated to verify, to the best of its ability, that you will be able to make your payments moving forward. They do not want to foreclose on your property. No one wins when that happens.

Through the first eight months of 2009, the mortgage industry helped avoid 2.1 million foreclosures, and through October 31, 2009, servicers extended more than 919,965 HAMP mortgage modification offers and have initiated more than 650,994 trial modifications (a three-month period in which a borrower makes on-time payments on a modified mortgage before the modification can become permanent).

If you are truly facing financial hardship, there may be help available. Be aware, however, that not everyone qualifies for a mortgage modification. As you go through the process, try to be as cooperative and patient as possible. Keep in contact with your counselor or servicer and don't be afraid to ask questions. You will be asked to provide numerous documents and fill out many forms. Be honest and realistic about your situation so you don't find yourself facing foreclosure again in the future.

What to expect from the HAMP process

Under the guidelines established by the U.S. Department of the Treasury, your servicer will need the following from you in order to evaluate you for a HAMP modification:

First, you will need to give an explanation of your financial hardship and the reason you cannot or believe you may soon not be able to make your mortgage payment. The government has given examples of acceptable hardships:

a. Reduction in or loss of income that is needed to pay the mortgage.
b. Change in household financial circumstances.
c. Recent or upcoming increase in your monthly mortgage payment.
d. An unavoidable increase in other expenses.
e. A lack of cash reserves to maintain payment on the mortgage and cover basic living expenses at the same time. (This can include cash savings, money market funds, stocks or bonds, but not retirement accounts.)
f. Excessive monthly debt payments and over-extensions with credit cards. For example, you have been using credit cards, a home equity loan or other credit to make your mortgage payment.
g. Other reasons for hardship detailed by the borrower.

The first step is to contact your "servicer," which is the company you send your mortgage payments to. The HAMP program requires your servicer to collect the following information from you:

1. Your current monthly household income from all sources including salary or wages, tips, bonuses, alimony, retirement benefits, unemployment benefits or public assistance. Be sure to know when your unemployment or other benefits are scheduled to expire. It is important that you have evidence that unemployment benefits will continue for at least nine months. If applicable, borrowers should also provide documentation of other income including social security, disability, death benefits, pension or public assistance such as letters, insurance policies or statements and should be able to show the frequency and duration of the benefits. Borrower must also provide the two most recent bank statements showing receipt of such payments.
2. Two most recent pay stubs from your current employer showing year-to-date earnings.
3. IRS Form 4506T signed and dated by each borrower.
4. If you are self-employed, your most recent quarterly or year-to-date profit / loss statement.
5. In certain cases, signed copies of your most recent federal tax return. (If you have filed electronically, print a copy and have all parties sign the hard copy.)
6. Household expenses, including but not limited to second mortgages, revolving debt, car payments, alimony / child support and homeowners’ association (HOA) and / or condominium fees, if applicable.
7. Your hazard and flood insurance premiums, as applicable.
8. Your real estate / property taxes. This information is often available online from your county, city or other tax jurisdiction’s web page.
9. Household assets, including but not limited to amounts in checking and savings accounts, certificates of deposit (CDs), stocks and bonds.

If you are current or less than 60 days delinquent with your mortgage payments but believe you are at risk of "imminent default" and want to discuss a loan modification, you will be subject to a more thorough review of your household finances. You are likely to be asked to provide documentation of all household income and household expenses.

More information on the Home Affordable Modification Program can be found at www.makinghomeaffordable.gov.

Other considerations

Stay in contact with your servicer and/or mortgage counselor at all times. Notify them of any change in your circumstances, including new employment or problems with making payments under any modification plan.

Be patient, cooperative and honest, and keep your commitment on any modification agreement.

A HAMP modification is not the only loss mitigation tool available. If you do not qualify for HAMP, ask your servicer about other "workout" alternatives, including postponements of regular payments (called forbearance), repayment plans, non-HAMP modifications and other options.

Only work with reputable servicers and counselors. There are a lot of fraudsters out there looking for targets. For some hints, download our guide to Avoiding Foreclosure Rescue Scams.