The Home Affordable Modification Program (HAMP) is being extended and expanded to reach more borrowers- will it be enough to help or an example of “too little too late”?
On January 27, 2012, the Treasury department announced the revisions.
First, to encourage principal reduction, the Treasury is tripling incentives and paying 18 to 63 cents on the dollar depending upon the change in the loan-to-value ratio. In the past, the Federal Housing Finance Agency (FHFA) prohibited Freddie and Fannie from using HAMP to reduce principal. Treasury now allows the incentives for Freddie and Fannie if they allow servicers to forgive principal in a HAMP modification. So if your servicer previously denied your HAMP modification, check to see if your loans are owned by Freddie or Fannie because the rules may be different now. Here’s how to do that.
Second, a more flexible debt-to-income ratio can be used in an alternative program evaluation for second mortgages and other debt such as medical bills.
HAMP itself is being extended for an additional year through December 31, 2013. And now the program is open for non-homestead properties.
Freddie Mac and Fannie Mae hold an estimated 3 million first mortgage liens that are underwater. FHFA has stated that 80 percent of these underwater borrowers are current as of June 30, 2011.
Will this be enough to revive HAMP from the dead? Probably not says some experts mainly because there are no incentives to servicers and frankly they are the problem.