A loan modification or mortgage modification is a process where the terms of a mortgage are modified outside the original terms that were agreed to by the lender and borrower.
Mortgages are modified to benefit the borrower in one or more of the following ways:
- Reduction in interest rate,
- Reduction in monthly mortgage payment,
- Change from an adjustable rate to a fixed rate,
- Lengthening of the loan term from 30 to 40 years,
- Either waiving or capitalizing of the delinquent payment and fees, and
- A possible reduction or deferring of the principal balance.
Home Affordable Modification Program, also known as HAMP, is part of the Making Home Affordable Program which was created by the Financial Stability Act of 2009. Most modifications today are under the HAMP program.
Program purpose and eligibility requirements
The HAMP program abides by the following eligibility and verification criteria:
- Loans originated on or before January 1, 2009,
- First-lien loans on owner-occupied properties with unpaid principal balance up to $729,750,
- Higher limits allowed for owner-occupied properties with 2-4 units,
- All borrowers must fully document income, including signed IRS 4506-T, proof of income, and must sign an affidavit of financial hardship,
- Property owner occupancy status will be verified through borrower credit report and other documentation; lender/investors have proprietary modification programs for those who do not qualify for a HAMP program,
- Incentives to lenders and servicers to modify at risk borrowers who have not yet missed payments when the servicer determines that the borrower is at imminent risk of default
- Modifications can start from now until December 31, 2012; loans can be modified only once under the program.
Terms and Procedures
- Participating loan servicers have terms and procedures that are identified with each HAMP submission package. Every homeowner that files for a modification should have a lawyer assist with the process.
See disclaimer page for additional information regarding loan modification process.
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