Condominium owners struggling with their monthly housing payments can modify the terms of their mortgage agreement under the Home Affordable Modification Program, or HAMP. Condo owners must prove financial hardship and provide their lender or loan servicer with the amount of condo or homeowners association dues they pay. The lender includes condo fees when calculating HAMP eligibility; however, the lender does not collect condo fees directly from borrowers in a loan modification.
The federal government created HAMP to help owners of one- to four-unit properties reduce their monthly loan payments and avoid foreclosure. The program streamlines eligibility guidelines among lenders servicing loans owned by Fannie Mae and Freddie Mac. The Federal Housing Administration, which insures mortgages made on approved condominium projects, also has its own version of HAMP. Conventional and FHA-backed mortgages made on condos can qualify for HAMP if the owner meets income and hardship guidelines.
Mortgage Debt Ratio
Lenders calculate the monthly mortgage payment ratio, also known as debt-to-income (DTI) ratio, which includes all costs associated with condo ownership. The ratio compares the borrower’s current monthly housing payment to monthly gross income. Condo housing costs include mortgage principal, interest, property taxes, hazard insurance, flood insurance -- if applicable -- and condo association or homeowners association (HOA) fees. To qualify for HAMP, your current housing costs must exceed 31 percent of your gross income, or 31 percent DTI. The loan modification must lower your housing payment to about one-third of your gross income. As such, your modified payment may be above or below a 31 percent DTI ratio.
Borrowers may have to pay property taxes and hazard insurance into a mortgage escrow account, also known as impounds, each month along with their loan payment. Under HAMP, borrowers with escrow accounts continue to pay condo fees directly to the condo association or homeowners association each month. You must disclose to the lender the amount you pay in condo fees, whether you are behind on the fees, and if so, the amount owed. The lender may require supporting documents, such as an HOA bill, or may attempt to obtain the information directly from the condo or homeowners association.
FHA borrowers must successfully complete a trial payment plan of three months with their lender before obtaining a permanent loan modification through HAMP. As of mid-2012, conventional borrowers who defaulted on a trial payment plan or a previous HAMP modification can qualify for a new loan modification. Borrowers may modify mortgages on condos currently used as rentals or intended as rentals. The condo's value may not exceed $729,750 and the borrower's lender must participate in HAMP.
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