VA Mortgage Guide Blog
VA Mortgage Guide Blog

Obama administration announces changes to HAMP

As part of its continuous effort to improve housing relief conditions, the White House issued a statement a few days ago that changes have been made to the Home Affordable Modification Program (HAMP). In addition to this, there’s also a new Federal Housing Administration (FHA) to take effect. Free HAMP Report has more:

HAMP Improvements

1. Temporary assistance for unemployed homeowners while they search for re-employment

  • Mortgage payments reduced to affordable level for a minimum of three months, and up to 6 months for some borrowers, while eligible homeowner looks for new job. Via forbearance, month housing payment is set at 31% of monthly income while borrower is unemployed. A temporary assistance plan to be offered to unemployed borrowers. Servicers required to offer assistance to unemployed borrowers who meet specific criteria. Treasury says forbearance will not cost taxpayers anything.

2. Requirement to consider alternative principal write-down approach and increased principal write-down incentives

  • All servicers required to consider alternative modification approach that emphasizes principal write-down for HAMP eligible borrowers who own more than 115% of current appraised home value.
  • Pay for Success Structure: Alternative principal reduction allows some underwater homeowners to reduce principal balance of their mortgage in steps over three years, if they remain current on payments.
  • Servicers will initially treat the write-down amount as forbearance and will forgive the forborne amount in three equal steps over three years, as long as the homeowner remains current on payments
  • For borrowers who have already received a permanent modification, or who are in a trial modification, and are still current on payments at the time the alternative modification approach is operational (later in 2010), servicers will be required to retroactively consider extinguishing an amount of principal balance in the same amount that would have been forgiven under the new alternative approach.
  • Increased incentives to servicers and lenders, including increased incentives for extinguishment of subordinate liens, to encourage more short sales and other alternatives to foreclosure

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