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:
- To properties with one to four units with documented hardship
- For loans that originated before January 1, 2009
- For homes that have not been condemned
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.