Expiration of Popular Mortgage Modification Program, HAMP

Application for Mortgage Loan Modification

The Federal Government allowed the nation’s primary mortgage modification program, HAMP, to expire on December 31, 2016. The Home Affordable Modification Program, or HAMP, was introduced in 2009 to respond to the sub-prime mortgage crisis and it provided targeted aid to homeowners who met certain criteria. The primary eligibility requirements were that the loan needed to be originated before January 1, 2009, borrowers needed to document their income, suffer a financial hardship and the debt-to-income ratio needed to fall in the 30-35% range.

HAMP was uniformly used by most of the big banks and servicers and my office worked with more than a dozen of these banks and servicers to secure modifications for hundreds of our clients. While frustrating at times because of institutional bureaucracy, modifications were accomplished in a variety of ways, including through interest rate reduction, fixing the interest rate, reducing mortgage principal and/or forebearance and/or extending the term of the loan. HAMP was beneficial in that it provided clear and concise guidelines and included incentives for both the banks and the homeowners.

Neither Congress or Regulators have yet to put forth a replacement for HAMP. This is worrisome because it means that each bank or servicer is free to use and set their own guidelines. While there will be some period of uncertainty during this transition, our office will be working with homeowners and dealing with each bank or servicer’s specific and particular requirements.

Fannie Mae Is Getting More Detail On Borrowers Applying For Mortgages

Mortgage and down payment

Borrowers seeking home loans should know that many mortgage lenders will now be scrutinizing more detailed credit data. This is because Fannie Mae has revised its risk-assessment software to include an expanded version of a borrower’s credit report which will include more information about how a borrower has paid his or her credit card bills over the past two years. This change took effect on September 24, 2016. According to a product manager in Fannie Mae’s single-family homes division, this revision will help lenders predict whether borrowers are likely to repay their mortgage. In these new reports, lenders will be able to see the actual amount a potential borrower paid each month, over a 24-month period. Additionally, the lender can see if the borrower paid off a card balance in full each month, if they made just a minimum required payment and if they paid more than the minimum. Borrowers who pay in full or pay more than the minimum payment will be deemed as less risky. In addition to this new data, lenders will also be evaluating borrowers with other criteria, such as the borrower’s income/overall debt burden and the size of the loan relative to the property’s value.

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