NCLC Advice on Loan Modifications

In the newest article, the National Consumer Law Center provides advice for homeowners that need to get a lower monthly mortgage payment.  One of the most frequent questions we get is about HAMP modifications.  As explained in Morris v. BAC Home Loans Servicing, L.P., 775 F. Supp. 2d 255 (D. Mass. 2011), HAMP is:

…”a national modification program aimed at helping 3 to 4 million at-risk homeowners- both those who are in default and those who are at imminent risk of default-by reducing monthly payments to sustainable levels.” U.S. Dep’t of Treasury, Announcement 09-05R at 1, May 15, 2009. See also Speleos, 755 F. Supp. 2d 304, 2010 U.S. Dist. LEXIS 132111, 2010 WL 5174510, at *4 (stating that “the purpose of HAMP is to help homeowners avoid foreclosure by obtaining loan modification”); Bosque v. Wells Fargo Bank, N.A., No. 10-10311, 762 F. Supp. 2d 342, 2011 U.S. Dist. LEXIS 8509, 2011 WL 304725, at *2 (D. Mass. Jan. 26, 2011) (“The goal of HAMP is to provide relief to borrowers who have defaulted on their mortgage payments or who are likely to default by reducing mortgage payments to sustainable levels, without discharging any of the underlying debt.”). Allowing homeowners threatened with foreclosure to recover damages under Chapter 93A is compatible with this objective. Indeed, the Servicer Participation Agreement between servicers and the government provides that participating servicers must covenant to act consistent with state consumer protection laws. See Commitment to Purchase Financial Instrument and Servicer Participation Agreement, Ex. B, at 3, available at https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/servicerparticipationagreement.pdf (obliging the servicer to covenant that “all Services will be performed in compliance with, all applicable Federal, state and local laws, regulations, regulatory guidance, statutes, ordinances, codes and requirements, including, but not limited to, . . . Federal and state laws designed to prevent unfair, discriminatory or predatory lending practices and all applicable laws governing tenant rights.”).’

And you quality for HAMP by:

Unless you are excluded by one of the threshold tests described above, your servicer must evaluate you for FHA-HAMP which can permanently reduce your monthly payments. FHA-HAMP uses a complicated formula set out below to determine your loan modification, based on your income and loan payment. Once this loan modification is determined, you will be on a three-month trial plan on reduced payments. If that goes well, you will receive a permanent modification with lower mortgage payments.

To qualify for the FHA-HAMP program, the property must be owner-occupied. The borrowers must be in default or at imminent risk of default. Borrowers who have received a chapter 7 bankruptcy discharge and did not reaffirm their mortgage debt are eligible for FHA-HAMP, as are borrowers currently in bankruptcy. A default on an FHA-HAMP trial modification does not preclude later eligibility for a new modification, so long as the borrower can demonstrate changed circumstances justifying the new application. Borrowers are limited to one permanent FHA-HAMP modification in a two-year period.

Please contact our office if you think you are eligible for HAMP or some other mortgage assistance.