The Home Affordable Modification Program has expired but be sure to take a look at our list of alternatives listed below.
HAMP was originally implemented by the government to help homeowners who were close to foreclosure to stay in their homes. HAMP has a bit of a history and it’s unclear if was really much help to homeowners who struggled so much when foreclosures were running wild here in the Santa Clarita and really, all of CA. It seems very few actually qualified for HAMP and if they did, it’s possible their lender did not participate.
This HAMP program was expected to help homeowners who were close to foreclosure, stay in their homes. Back in 2011, according to Bank of America only a mere 14% would qualify for a permanent HAMP modification. Originally HAMP was projected to benefit 4 million homeowners but according to our research that number was closer to 600,000. Then, the House Financial Services Committee voted to end HAMP as well as another bill to end the Neighborhood Stabilization Program.
The Home Affordable Modification Program was originally set to expire in 2012. Later, the Obama Administration expanded the population of homeowners that may be eligible for the Home Affordable Modification Program to include more of the population. Apparently, it wasn’t very effective!
The primary reason HAMP failed is because loan mods are only intended for those who experienced temporary financial hardship from which they have recovered. When the economy went south people lost their jobs and lenders were allowing just about anyone to get a loan mod. In the end, the only people benefiting were the lenders! Basically, they used it as an opportunity to just squeeze more money out of their clients, knowing full well they would simple default again!
Possible Alternatives to HAMP
Personally, we don’t have much trust in the government or even most lenders when it comes for assistance. Often, it seems as if large institutions sometimes offer ineffective programs as a way to make the public believe they are doing something to help. With that being said, we suggest doing your own extensive research if considering utilizing any alternative assistance with your mortgage.
Honestly, when it comes down to it, struggling homeowners can either pay their mortgage current, sell the property or simply allow foreclosure to happen. Other loan modification alternatives typically only delay the inevitable and cost the homeowner even more money.
List of Alternatives
It’s very important to know, loan modification are GREAT, but only for those who experienced temporary financial problems from which they have recovered. This could have been due to medical problems, loss of job or any other temporary hardship. If you have NOT improved your income to where it was before the financial problems begin, obtaining a loan mod is the WRONG SOLUTION!
- A Fannie Mae/Freddie Mac Flex Mod might be an option. This should knock off about 20% of a mortgage payment and homeowners can qualify with a 40% debt to income ratio. This only works for those with Fannie Mae or Freddie Mac loans.
- For homeowners with a FHA loan it’s possible to obtain a FHA loan mod that will lower the interest and extends the term of the loan. Problem is, all past due amounts and penalties are added to the loan.
- For those with a VA loan it’s possible to to also get a VA loan mod, similar to the FHA modification.
- There are also some Covid related loan mods, at least for those with FHA loans.
There are a good number of requirements to be eligible for any the loan modifications listed above. We are NOT going to list them here because they are a moving target and it’s mostly common sense. typically, homeowners need to prove a hardship existed and cannot have already obtained a loan modification in the recent past. There’s more of course, but once deciding on exactly which loan mod is right for you, be sure to look closely at the eligibility requirements.
Obviously, if it’s at all possible to simply refinance your existing loan, that’s the BEST option. We know, struggling homeowners probably cannot qualify but it’s till worth double checking! It really is! We’ve had clients swear they could not qualify for a loan and later discovered they were WRONG!
Standard Sale or Short Sale
If behind on the mortgage and cannot sufficiently recover, perhaps it’s time to sell! Or, if you owe the lender more than the home is worth, it’s time to consider a short sale. At least, with a short sale you are being proactive and remain somewhat in control. In our eyes, a better option than accepting a foreclosure.
We are NOT Attorneys or CPA’s
We must take this moment to remind our clients and visitors, at the Gregory Real Estate Group, we are real estate professionals and Certified Distressed Property Experts, but NOT attorneys or CPA’s. If you are a Santa Clarita homeowner considering a short sale we suggest you also consult with your tax professional and/or attorney before moving forward with a short sale transaction.