The governments Making Home Affordable Program (HAMP) released in March last year was designed to help homeowners modify mortgages and stay in their homes. While qualifications for HAMP seem pretty straight forward, the governments program appears to be failing.
While many borrowers have applied for HAMP, a very small portion of them seem to be getting the mortgage relief they had hoped for ending up in foreclosure or hiring a bankruptcy attorney. If you can’t get a straight answer from your mortgage servicer or denied a loan modification without good reason you might want to consider alternate measures. Borrowers continue to complain about going round and round for months with no results, or stuck in a trial period with no permanent modification.
The governments Making Home Affordable Program (HAMP) released in March last year was designed to help homeowners modify mortgages and stay in their homes. While qualifications for HAMP seem pretty straight forward, the governments program appears to be failing.
While many borrowers have applied for HAMP, a very small portion of them seem to be getting the mortgage relief they had hoped for ending up in foreclosure or hiring a bankruptcy attorney. If you can’t get a straight answer from your mortgage servicer or denied a loan modification without good reason you might want to consider alternate measures. Borrowers continue to complain about going round and round for months with no results, or stuck in a trial period with no permanent modification. The government encourages homeowners to try loan workouts directly with their lender and not hire an attorney. It’s almost like telling someone to do you’re their own brain surgery rather than go to a qualified physician.
First things first! In order to get a HAMP loan modification you’re required to pass the initial 5 question eligibility check, and most homeowners do. This Waterfall Process is what most homeowners are familiar with and see readily available. BUT, it’s really not as simple as qualifying for these 5 questions:
1. Is your home your primary residence?
2. Is the amount you owe on your first mortgage equal to or less than $729,750?
3. Are you having trouble paying your mortgage?
4. Did you get your current mortgage before January 1, 2009?
5. Is your payment on your first mortgage (including principal, interest, taxes, insurance and homeowner's association dues, if applicable) more than 31% of your current gross income?
While it might seem pretty simple to get a loan modification based on these 5 questions, there’s a lot more to getting approved than meeting these simple criteria. Not only do you have to meet all Federal program guidelines, lenders require you also pass specific guidelines and tests, most importantly the NPV test. The NPV test is an extremely complex mathematical formula provided by the Treasury Department for the banks use to determine if it’s more profitable to modify the loan or foreclose on the property. In some cases they may even consider approving a HAFA short sale, but these have proven difficult to negotiate.
Each lender runs the NPV as the final determining factor for a loan modification approval or declination. This is where most homeowners are denied for modification. The Lender can use the Federal NPV model or change it to meet their specific requirements. Another words, make up their own rules as they go along. It’s almost like a football referee moving to line you need to cross in order to get a first down. If you cannot pass the NPV you do not get a modification, it’s that simple! Many end up hiring a bankruptcy attorney to stop the foreclosure process or just walk away.
Through an independent third party bankruptcy attorneys now have access to the same decision models the Lender's use to determine if you are going to be approved for your loan modification or not. We are happy to provide this information to the public in an effort to help consumers determine the best route to take. If you pass the NPV test your chances for a loan modification would appear pretty good. It’s still up to your lender to modify but at least this way you can make an informed decision. Consulting an attorney, preferably a bankruptcy attorney makes a lot of sense if you are declined. A bankruptcy attorney can see if you qualify for a Chapter 13 or Chapter 7 bankruptcy. While filing bankruptcy is presumed to be a last ditch effort to stop foreclosure, many use bankruptcy as a means to eliminate underwater 2nd mortgages. Additionally, a bankruptcy attorney can give you a clear cut path as to what type of bankruptcy to file, Chapter 7 or Chapter 13.
