Loan modifications through the HAMP program, how would a borrower in distress go about seeking a loan modification.

The Home Affordable Modification Program is the government’s assistance extended to financially struggling homeowners to avoid foreclosure.

Eligibility requirements are as follows:  1) borrower is delinquent or is facing imminent risk of default, 2) property is borrower’s primary residence and 3) mortgage started on or before January 1, 2009 and unpaid principal balance must be not be greater than US$729,750 for one-unit properties, 4) existing monthly payments have to be more than 32% to 70% of the borrower’s pre-tax salary and 5) very high total debt levels that exceed 55% of gross income will be required to undergo a debt counseling program.

From April 2009-March 2011, the US Housing and Urban Development reports that more than 1.6 million HAMP trials were conducted nationwide as part of the government’s efforts to stabilize housing market and help American homeowners.  And as of October 2010, only about 480,000 homeowners were able to benefit through reduction of monthly mortgage payment.  There are claims that twice as many applicants have been kicked out of the program as accepted, and a significant number remains in the “trial modification” phase for 12 to 18 months while waiting for the ultimate decision whether they make it to the cut to be considered for a permanent modification.

How can one homeowner make then the most out of the HAMP?  Applying for the loan process can be challenging thus this is something homeowners should carefully go through.

The prospective homeowner may want to seek the help of a loan modification consultant or someone who at least knows what the program is all about. Good if he/she knows someone who has availed of the program himself.

Basic step is to check if the current financial state pre-qualifies one to the program. Once this is checked, the lender should be informed of the plan to avail of the HAMP.  It is good to learn that the government has mandated lenders to respond in 30 days. It is necessary that application forms are filled up with the accurate and updated data and the required financial documents should be prepared. One must be careful when preparing the required documentation. For others, there are stories of filed documents going missing so be sure to have enough duplicate copies of the important papers one needs to submit. Approved applicants will get 3 month trial loan modification and after another 3 months, the loan modification will be made permanent.

The process may seem simple but it takes a lot of time, perseverance and diligence.

While there are discouraging stories of denied applications, there is always that option to re-apply and be encouraged by the thought that a percentage makes it through. If denied, study the possible cause of HAMP denial. Applications may not pass because one may lack sufficient income or have too much income. Or the monthly mortgage payments are actually less than 32% of the gross monthly income. Sometimes, carelessness in filing these figures eventually muddle one’s chances to qualify for the program.

Indeed, a modification of your existing loan brings your current mortgage payment down, making it more affordable, thus saving your property from foreclosure.