HAMP Changes Take Effect Friday June 1

Effective Friday, June 1, 2012 HAMP “Tier 2”  -  which many people have simply referred to as HAMP 2.0  -  will roll out for the Making Home Affordable (MHA) loan modification program.  Like many MHA updates, these changes apply to non-GSE mortgages. 

The goal of HAMP 'Tier 2' is to increase eligibility for homeowners, including:

• those who did not meet the original HAMP guidelines,
• those who may have failed on a HAMP modification, or 
• those who own rental properties.

With HAMP 'Tier 2', many of the initial qualification criteria are still in place:

• loan must have been originated before January 1, 2009, 
• homeowner must be able to document a financial hardship;
• Only loans on properties with one-four units can be modified;
• there is a maximum outstanding loan amount (maximum unpaid principal balance.

But now, a borrower may also be considered for HAMP 'Tier 2' if any of the following also apply:

• they did not successfully complete (defaulted on) a HAMP 'Tier 1' modification;
• their monthly mortgage payment is below the minimum 31 percent front end Debt-To-Income ratio;
• and, most controversially, up to three seperate mortgages may be modified if they secure rental properties

No mortgage loan may be modified more than once in either Tier 1 or Tier 2. 

People interested in learning more about the HAMP program and the new 'Tier 2' changes, can visit the Making Home Affordable website, here.

The Homeownership Advisors Network will continue to focus its attention on helping owner-occupants avoid foreclosure, but may be able to answer some basic questions for rental property owners as well.

HAMP, HAMP 2.0, DTI, VPN, HARP, MHA, GSE... the 'alphabet-soup' of programs, agencies and programs can be overwhelming for struggling homeowners.  In Minnesota, there is a FREE, effective resource available: The Homeownership Advisors Network.  Trained and certified foreclosure prevention experts can work with YOU to find a solution to YOUR mortgage issues.  Don't delay, contact an advisor by visiting the Center's website today.

Are HAMP Improvements Possible?

On Wednesday, November 17th, MN Senator Franken joined 17 other Senators in sending a letter to Treasury Secretary Timothy Geithner asking for immediate changes to the HAMP program to help homeowners facing foreclosure. 

The complete letter is here. (PDF Document)

Here are some of the key steps the Senator(s) recommend implementing in order to improve the HAMP program:

• The creation of the Office of the Homeowner Advocate. This office would focus on assisting homeowners who believe their mortgage servicer is breaking the rules;
• Provisions that would hold servicers accountable;
• Automatically extend permanent mortgage modifications if trial modifications are completed successfully;
• Revise eligibility requirements;
• Ensure that servicers provide homeowners with necessary documentation; and
• Provide homeowners with information as to why they have been denied HAMP modification.

The Minnesota Home Ownership Center applauds any and all efforts to assist struggling homeowners... and welcomes your comments as well!

• Will Senator Franken's suggestions improve the HAMP program?
• What improvements would YOU suggest to improve the HAMP program?
• Do you have other suggestions for helping struggling MN homeowners?

Use the comments section to post your suggestions.

HAMP, HARP and Now HAFA too?

Last week we mentioned that HAMP and HARP were members of the duet known as Making Home Affordable... well... the group has added a third band member and is now a trio.

The U.S. Treasury has announced the "Home Affordable Foreclosure Alternatives" (HAFA) Program which is designed to help struggling homeowners who are unable to qualify for a mortgage modification under the Home Affordable Modification Program (HAMP).

HAFA sings backup for HAMP, and provides incentives to servicers/lenders as well as borrowers to move forward with a short sale or deed-in-lieu of foreclosure.

Just as an FYI, in a short sale situation, the mortgage holder allows the homeowner to sell the property for a price short of the balance owed on the property’s loan.

The Center will be working on a more in-depth fact sheet over the coming weeks, but the basics of the program are as follows:

• Should speed up the Short Sale process, as it uses borrower financial and hardship information that was collected when they applied for a HAMP modification.
• Allows borrowers to receive PRE-APPROVED short sales terms (including minimum price accepted, proceeds to owner and real estate agents, etc.) BEFORE listing the property.
• KEY: While in Minnesota, as a non-recourse state, first mortgage debt is fully released from future liability, under HAFA, subordinate lien holders that receive an incentive under HAFA must also FULLY RELEASE that debt as well.  This means that homeowners will not have to sign a promissory note or worry about a future deficiency judgment.  (NOTE: This is ONLY if the junior, or subordinate, lien holder receives money under HAFA.
• Unifies documents, timeframes and deadlines to speed up the process.
• Provides financial incentives for all parties.  $1,500 to the borrower for relocation assistance and $1,000 for servicers to cover admin costs, and up to $3,000 in short sale proceeds to be shared among subordinate lien holders.  In most cases subordinate lien holders see nothing from a short sale... and have been the reason that many short sales have fallen through.  It will be interesting to see if this incentive changes their attitude.  It will be especially interesting to see if junior lien holders will be willing to trade possible FUTURE JUDGMENTS for a rather small ($3,000) incentive today.
• Requires ALL SERVICERS participating in HAMP to implement HAFA.
• Goes into effect on April 5th, but lenders and servicers may begin sooner if they choose.  The program is scheduled to end on December 31, 2012.
• Homeowners that are denied for a HAMP modification MUST receive a notification from their lender/servicer, in writing, of the HAFA option and give the borrower 14 days to respond orally or in writing.

Who qualifies for HAFA?

The homeowner must meet the basic eligibility criteria for HAMP

• the loan must be on their Primary Residence (no investors or second homes);  
• 1 to 4 units, as long as one of the units is the owner's primary residence;
• First lien originated before 2009 Mortgage either delinquent or in imminent danger of default,
• Unpaid principal balance no more than $729,750;
• Borrower’s total monthly PITIA payment exceeds 31% of gross income.

BIG QUESTIONS still remain about the program:

• Will homeowners that won't be able to hold on to their properties go through the extra effort to sell... or simply walk away.  "Post-HAMP-Denial-Strategic-Default"
• What effect will this new program have on already-pressured sales prices?  Short Sales already put a downward pressure on local "comps".  What will happen when there is a FLOOD of HAFA-generated short sales?
• What procedures are in place to prevent fraud?  Real Estate Agents are being called upon to help the bank determine the price they'll accept, and once the price is set, any offer over the minimum amount MUST be accepted by the bank.  This could be a magnet attracting fraud at all kinds of levels.

Feel free to respond in the comments!

Home Affordable Refi Program Extended

The Home Affordable Refinance Program (HARP), the lesser-known half of the "Making Home Affordable" duet, has been extended for one more year, and will now be available through June 30, 2011, according to a statement from the Federal Housing Finance Agency.

The idea behind the HARP program is to allow borrowers who owe up to 25% more than their homes are currently worth* to refinance to a quality, fixed-rate mortgage.   

The Minnesota Home Ownership Center has a fact sheet that can help understand the basics of the entire "Making Home Affordable" program, here.

ALSO... we couldn't post about loan modifications / refis with warning Minnesota Home Owners, AGAIN, to make sure that they DO NOT PAY for any third-party loan modification service. Deal directly with your lender yourself, or with one of our free, non-profit Foreclosure Counselors. For additional warnings about for-profit loan modification companies (and scams)... visit here.  To find your local non-profit Foreclosure Counselor, click here.

* While program guidelines allow for 125% Loan-To-Value (LTV) amounts... most lenders are only allowing 105% or less LTV... one of the major drawbacks to the program.