If you are having trouble meeting your mortgage payments and fear you may be facing foreclosure, you should look for help sooner rather than later. The federal government has put in place a program called the Home Affordable Modification Program, or HAMP, which works with your lender to reset the terms of your loan so that you can more easily meet the monthly payment. In order to qualify, you must be seeking a modification of the mortgage on your primary residence, you must have held the mortgage since before January 1, 2009, and your current loan amount must be equal to or less than $729,750.
Set out in writing your difficulty with your mortgage payment and how it arose. Detail in writing how your circumstances have changed, for instance if your mortgage payment has risen because of an interest rate reset, or if you have lost your job or had to meet unexpected medical bills.
Gather any documents you may have that support your case for a loan modification. For instance a bill for your increased mortgage payment, recently paid medical bills, or documentation showing you lost your employment.
Calculate what percentage of your current gross income you pay toward housing costs. You can include mortgage principal, mortgage interest, property taxes, insurance and homeowner’s association dues in your calculation. If it is more than 31 percent, you are eligible to apply for HAMP.
Calculate exactly how much you would be able to pay in a reduced mortgage payment on your current income. In order to qualify for HAMP, you must demonstrate that you can continue to afford a reasonable reduced payment. Calculate 31 percent of your current gross income, less the amount you pay each month in property taxes and insurance, and this would be the amount you can afford to pay your lender. Gather pay slips or other income verification.
Contact your loan servicer to fill out paperwork to apply for HAMP. You need the calculations and documentation outlined above. Your servicer makes a final determination about your case based on a formula called Net Present Value, or NVP. This is a proprietary formula that only your loan servicer can calculate.
To test your eligibility calculations, visit the government’s Making Home Affordable site, where there’s a Payment Reduction Estimator tool.