HAMP (the Home Affordable Modification Program), the government's loan modification program, expired December 30, 2016. Unless your application was accepted before then, HAMP is not an option for you.
But it's still possible to avoid foreclosure by getting an in-house loan modification.
In-house modifications are also called traditional or proprietary modifications, because they existed before HAMP was created and are given according to each lender's standards.
In-house modifications can offer some benefits that HAMP didn't since a lender or investor doesn't have any requirements to comply with. They can do whatever they want, and have flexibility regarding who gets a loan modification and under what terms.
Potential Benefits of In-House Modifications
Speed. Needing no one's approval but their own, it's possible for a bank to approve an application for an in-house modification more quickly than was possible with HAMP.
Fewer trial payments. Three trial modification payments were typically required to be approved for HAMP, but a lender giving an in-house modification can approve a permanent modification with fewer than three trial payments, or none at all.
Fixed interest rates. While most HAMP modifications had interest rates that increased over 5 years, in-house modifications can have a low fixed interest rate for the whole term of the mortgage. Interest rates have nowhere to go but up in the future, and modified loan terms are often as long as 40 years, so a fixed low interest rate can provide a lot of savings.
Less stringent guidelines. Things that would have disqualified you from participation in HAMP may not prevent you from participating in a traditional loan modification. A lender can decide to give you multiple modifications or modify a mortgage on a vacation or rental property.
Applying for an In-Mouse Modification
You have to contact your loan servicer to be eligible for an in-house modification. Tell them what your intentions are. It's possible that they could offer you a streamline modification that doesn't require you to submit any paperwork, but more likely that you'll have to complete an application called an RMA (Request for Mortgage Assistance).
Your RMA will include thorough documentation of your income, debt, and expenses. A rule of thumb is that it generally takes about as much documentation to get a loan modification as it does to get a mortgage. Different lenders have different requirements, but the following are generally required:
- Utility bill
- Hardship letter
- Bank statements
- Last 2 years tax returns
- Financial worksheet
- W-2s
Updated bank statements and utility bills have to be sent in each month that the application is under review. Many homeowners find sending in the same documents multiple times to be frustrating.
When an RMA is finally accepted it's common for the lender to deny the application. They may not be convinced that you can afford to keep the property with the income you've documented. It can take a lot of time and effort, and the bank may be trying to foreclose on you while you're working on a solution. That's why it's so beneficial to have a foreclosure defense attorney to protect you from foreclosure while you're pursuing a loan modification.
One of the benefits of HAMP was that borrowers who were eligible for participation in the program were required to be evaluated for it. Your lender is not required to evaluate you for an in-house modification. They can do whatever they want, and that flexibility can work for you or against you.
You could lose your home unnecessarily or get a bad loan mod if you do it yourself and don't have experience with the process. Or you could work with an experienced professional and have the best chance at getting a great modification that allows you to keep your home with a permanently lower payment.
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