What does it do?

The progr
Photo by woodleywonderworksam focuses on “responsible homeowners” that can afford a reasonable mortgage but need help to get a modification to reduce the monthly costs of a mortgage and avoid foreclosure. It is not designed for investors, owners of vacation homes or people who bought homes they could not afford.

The Facts

The program set out to help 4 million homeowners by 2012. Currently it has helped over a million homeowners with their mortgages. The main method used is to provide homeowners that are struggling to make their monthly payments with loan modifications that reduce the monthly cost of mortgages. This help is not always permanent; only a small percentage – 230,801 by March 2010 – has received a permanent loan modification. The program requires borrowers to enter a three-month trial modification before receiving permanent loan modifications. According to Treasury’s March report on the program 780,951 modifications are still in the trial stage. If a homeowner does not provide the necessary paperwork or does not pay his mortgage regularly he will not qualify for a permanent loan modification.

Loan modifications are designed to reduce monthly payments by various methods. These include extending the term of the loan, reducing the mortgage interest rate and reducing the principal balance of the mortgage. Nevertheless, lenders are rarely willing to reduce the balance of the mortgage except in extreme cases. Loan modifications have, according to the Treasury Department’s own report, saved homeowners over $3 billion in reduced monthly mortgage payments.

Eligibility

To qualify for a loan modification:

-       The mortgaged home must be your primary residence.

-       The loan balance must be less than $730,000.

-       Your monthly mortgage payments must be greater than 31 percent of your monthly income.

-       You must prove you have suffered some kind of financial hardship.

Check if your are eligible for a Home Affordable Loan Modification Program (HAMP)

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