The Making Home Affordable Program was introduced in February, 2009. The HAMP Tier 2 program became effective June 1, 2012. Changes to the program have now been implemented in an effort to increase participation and the number of homeowners who are eligible in the hopes of preventing foreclosures.
The new guidelines fall under the title of HAMP (Home Affordable Modification Program) Tier 2, expanding the qualifications and deadlines to be eligible for a loan modification under HAMP or other relief available through Home Affordable Unemployment Program, the Home Affordable Foreclosure Alternatives Program or the Second Lien Modification Program. As set forth in Tier 1, HAMP Tier 2 also does not apply to mortgage loans through Fannie Mae or Freddie Mac or loans guaranteed by the Veterans Administration, the Department of Agriculture Rural Housing Service or the Federal Housing Administration (FHA).
An overview of the significant changes to HAMP includes an extension of the program to December 31, 2013. All applications for a loan modification, unemployment forbearance, or any of the other programs through the Making Home Affordable Program must be received by the borrower by this date.
Other revisions found in HAMP 2 include:
Expansion of number of loan modifications. HAMP Tier 1 allows only one loan modification. HAMP Tier 2 allows modifications of up to three different mortgages.
Inclusion of non-owner occupied homes. Mortgage holders who don't occupy the home as their principal residence are now eligible under HAMP Tier 2.
An expansion of the owner occupied terms, to include properties of displaced borrowers -- those deployed in the military, with job transfers out of the area, etc. -- as long as the property was their principal residence before their relocation and they intend to re-occupy the home in the future. The current occupant cannot be a tenant for owner occupied terms.
Provides 12 month forbearance assistance to unemployed. Servicers are required to offer forbearance assistance to unemployed homeowners for 12 months. When the borrower gains employment or the 12 months have expired, they will be evaluated for eligibility under HAMP. This UP unemployment assistance has been expanded to included borrowers whose loan is secured by a vacant or tenant-occupied property. The borrower's monthly mortgage payment ratio does not affect their consideration for assistance. Borrowers who defaulted on a HAMP trial plan or HAMP loan modification must also be considered for UP assistance.
UP unemployment assistance extended. Servicers are being required to consider borrowers for UP assistance, without regard to their monthly mortgage payment ratio, or if they've defaulted on a HAMP Tier 1 trial or modification payment plan.
Eligibility for borrowers who received a modification under HAMP Tier 1. Borrowers who weren't successful with a HAMP 1 trial payment plan are eligible to apply for HAMP 2 modification, as long as 12 months have passed.
Revision to debt-to-income ratio for qualification. HAMP Tier 2 sets the pre-modification monthly mortgage payment below 31 percent of debt-to-income ratio. Borrowers are not eligible under HAMP Tier 2 if their post-modification debt-to-income ratio is less than 25% or greater than 42%.
A requirement that a modification must result in at least a 10% reduction to qualify. HAMP Tier 2 eligibility requires a 10% or greater reduction in monthly principal and interest payments after modification. If less, the mortgage is not eligible for modification under HAMP.
Loan modifications and other programs that fall under HAMP and the Making Home Affordable Program apply:
In addition, the Net Present Value (NPV) has been revised in an effort to qualify more homeowners for assistance under HAMP's Tier 2. Those who do not qualify, but are unemployed or have a documented hardship, borrowers are encouraged or required to consider for other assistance or relief, depending on their circumstances.
Through these revisions, the government hopes that its program will provide relief to more homeowners and make a bigger impact on the housing market by enabling more homeowners to prevent foreclosure and reduce their monthly mortgage payments to a manageable amount.
Keep in mind that the changes were just made on June 1, 2012, mortgage servicers are implementing and learning the guidelines simultaneously. Take it upon yourself to learn and understand the HAMP Tier 2 guidelines; this way you will know if you qualify. Become your own best advocate!
Anna Cuevas, ex-bank executive turned homeowner advocate known as "America's Loan Modification Guru," has empowered and guided thousands of Americans in keeping their homes from foreclosure through loan modification self-advocacy. A popular blogger (askaloanmodguru.com), Cuevas has been called a "superhero of the loan modification industry" and has been nominated for CNN's Heroes. She is the #1 bestselling author of SAVE YOUR HOME Without Losing Your Mind or Money.
Follow Anna Cuevas on Twitter: www.twitter.com/annacuevas
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I was just served with a NOD two weeks ago and I am now working with my B of A Case Agent, specifically filling out the loan mod docs. Since my income varies from $900 a week to as much as $1,200 a week, my DTI falls at 47% on my low end and 35% on my high end excluding about $1,300 in other bills, such as car and credit card bills? Must I keep it at 31% or around that?
Also, since I just started working and I am paid cash, B of A wants a letter from my employer in company letterhead stating how much I earn. My employer by the way says that he can state that I make between $900.00 and $1,200.00 a week which is true, but also said that he could just state that I make $1,200.00 if that will help me qualify. What do I do?
Thank you Anna,
WD
YOU SAY THAT Borrowers are not eligible under HAMP Tier 2 if their post-modification debt-to-income ratio is less than 25% or greater than 42%,but how do you know if you qualify/ you say post modification. I don't understand. thanks
HAMP Tier 2 is calculated as follows:
Step 1 – Capitalization. The servicer capitalizes accrued interest, out-of-pocket escrow advances to third parties, and any required escrow advances that will be paid to third parties by the servicer during the trial period plan as well those servicing advances that are made for costs and expenses incurred in performing servicing obligations.
Step 2 - Interest Rate Adjustment to the current “Tier 2 Rate”, which is a fixed-rate based on the weekly Freddie Mac Primary Mortgage Market Survey (PMMS) Rate for 30-year fixed rate conforming loans, rounded up to the nearest 0.125 percent plus a risk adjustment expressed in basis points. On the Effective Date the risk adjustment will be fifty basis points.
Step 3- Term Extension. NPV 5.0 extends the term and re-amortizes the mortgage to 480 months
Step 4 - Principal Forbearance. If the loan’s pre-modification mark-to-market loan to value (LTV) ratio is greater than 115 percent, calculating a principal forbearance in an amount equal to the lesser of (i) an amount that would create a post-modification mark-to-market LTV ratio of 115 percent using the interest bearing principal balance or (ii) an amount equal to 30 percent of the post-modified UPB of the mortgage loan (inclusive of capitalized arrearages). No excessive forbearance limit in HAMP Tier 2.