HAMP Mortgage Modification and Alternatives

by Antonio, by Mara, by Emory, and by Donna

Ask Kate about HAMP mortgage modification options and alternatives: Antonio is perplexed over the new guideline requiring delinquent payments for rental properties. Mara asks for alternatives to HARP refinance because she's afraid she will lose her home. Emory's friends have suggested he should strategically default on his mortgage. Donna doesn't know who to trust so asks me about modifying her home loan with a fixed rate.


HAMP Tier II for rental property requires two due or unpaid monthly payments?

By Antonio

Kate, My loan on what now is a rental property (due to an increase mortgage rate, reduced income, and to avoid foreclosure) is current.
HAMP Mortgage Modification
However, you have stated that you must be at least two payments behind for rental properties to be considered.

The HAMP Tier two handbook or guideline states "that a mortgage loan secured by a rental property that is not in default even if default is reasonably foreseeable is not eligible for HAMP Tier 2".

My question is with their statement of "a mortgage loan secured by a rental property" - What makes a mortgage loan secured by a rental property? Isn't this something that must be stated clearly on the original mortgage, meaning when I got my original mortgage I didn't get and don't have an investment property mortgage. But after not being able to afford the house I now have it rented out.

Can the fact that I'm probably underwater and owed $35,000 more that the original loan amount (I wasn't able to make payments in 2008 - and at that time Countrywide did a loan modification adding the $35k into the original principal of the loan ) help me qualify?

All I want is a fixed rate which I haven't not been able to get in a refinance from any bank probably because I am underwater. Your thoughts are greatly greatly appreciated.

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: HAMP Tier II for rental property requires two due or unpaid monthly payments?

Hi Antonio,

I'm glad to see you are questioning this distasteful guideline which is drastically out of sync with the spirit of Making Home Affordable program.

For Making Home Affordable guidelines to require two delinquent house payments on rentals to possibly get loan consideration is shameful.

Although I quoted the HAMP II guideline, I am not suggesting that homeowners purposefully miss house payments in hopes of securing HAMP approval for investment properties. That would be risky and carry no guarantees.

Principal Residence or Rental Property?

Now to answer your question, what defines a mortgage loan secured by a rental property?

Even if the original mortgage was secured for a principal residence, the current occupancy at the time of refinancing or modification dictates loan terms.

In other words, the current occupant, owner or renter, determines the status of new financing.

Hardship Letter of Circumstances

I can understand your dismay after taking responsibility by renting your home to avoid mortgage foreclosure. So here's what I'd suggest. I'd pour my heart and soul into a hardship letter. Not overly emotional but detailing the circumstances that led up to the decision to rent your home.

A hardship letter doesn't guarantee modification approval. But if you don't work on one that truly explains your situation, your HAMP application is nothing more than a pile of paperwork. So personalize it with an outstanding hardship letter.

To read more about modifying your home loan, go to HAMP 2 Mortgage Modification News.

I wish you the best, Antonio,

Ask Kate

Are there alternatives to losing my home?

By Mara C from Rehoboth, Massachusetts

Hi Kate,

I have a subprime loan that is interest-only and my bank will not continue to give me interest only. This is a 5 year ARM. They said they would do a modification but have to amortize principle and interest over the remainder of the term.
HAMP Loan Modification

Is there any help for me to get a low rate with a payment I can afford. My bank said my loan is not Fannie Mae or Freddie Mac.

I am a school office assistant making $15,000 per year and am afraid that I will lose my home. I was victim of the stated income, interest only, ARM scandal that I want out of.

I have been making my house payments with the insurance money I received when my husband passed away. That money has gone to pay for my children's college expenses and my house payments. The money is almost gone so I have to sell the house by March 2015 or my payments will more than likely start going up and then I will have an even tougher time making payments.

Is there any help for me? Thanks, Mara C.

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Are there alternatives to losing my home?

Hi Mara,

To be eligible for refinancing with the HARP 2.0 plan, a mortgage must be backed by Fannie Mae or Freddie Mac.

But go here to see for yourself whether or not your mortgage is Fannie or Freddie backed before ruling out HARP.

HAMP modifications accept mortgages that are not necessarily backed by Fannie Mae or Freddie Mac. However lender participation in the HAMP program is voluntary, so not all homeowners have the program at their disposal. And as you've found out, modification payments are not always affordable.

HAFA Alternatives to HAMP and HARP Programs

You may have additional alternatives, although perhaps different from what you've had in mind. These options are called Home Affordable Foreclosure Alternatives, HAFA for short.

HAFA includes Deed in Lieu, Deed for Lease, and Real Estate Short Sale. (Follow this link to more details on the plans.)

Mortgage Forbearance for Unemployed Homeowners

Due to the job uncertainty in our economy, I want you to know about HAUP, Mortgage Forbearance for Unemployed Homeowners.

House payments of unemployed homeowners are sometimes deferred up to a year or reduced to an affordable level. So keep this option in your back-pocket should you lose your job.

Funds for the Hardest Hit Housing Markets

Although Massachusetts is not included in this list today, there are special funds available for struggling homeowners in Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, and Washington DC.

Used in conjunction with Making Home Affordable Modification Program or separately, the Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (HHF) assists by:
  1. Helping with mortgage payments for unemployed and underemployed.

  2. Reducing principal balances.

  3. Eliminating 2nd mortgages.

  4. Smoothing the transition into more affordable residences.
To verify the current inclusion of a state, go to its .gov website by searching for "state-name.gov".

Making Home Affordable Housing Counselors

Mara, I also suggest calling a Making Home Affordable housing counselor to discuss your housing options. Their service is free and they may have additional suggestions based on your personal circumstances.

Best wishes in getting an affordable payment,

Ask Kate

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Loan programs for less than prime credit scores and underwater loan-to-value?
by: Emory from Atlanta, Georgia

Kate, I have a conventional loan through a mortgage company that does not participate in the HARP program. Can I apply for a HARP refinance through another lender or only my current lender?

Mortgage payments are current but I struggle to keep them that way. Loan balance is higher than home value. My credit score is only 583 but that is due to lack of credit, not bad credit and it seems no one will talk to me about conventional re-finance because of credit score and loan to value.

What are my options? Someone suggested stop making payments and then I qualify but I don't want to hurt what credit I do have. Is there a program to help those that are struggling to keep making the payments but are less than prime credit scores and LTV is not 80%?

Ask Kate answers: Loan programs for less than prime credit scores and underwater loan-to-value?

Hi Emory,

You can use any participating lender for Making Home Affordable's HARP refinance program per the new guidelines which came out in spring of 2012. But initial eligibility depends on whether Fannie Mae or Freddie Mac backs your mortgage.

Go here to verify if your mortgage is backed by Freddie Mac or Fannie Mae.

Or for homeowners who do not qualify for HARP, there is a loan modification program through Making Home Affordable called HAMP. You apply to this program through your current lender.

Learn more about HAMP Tier 2 help for homeowners struggling with underwater mortgages.

If you quit making your monthly house payments, you will be subjecting yourself to mortgage foreclosure. In today's vernacular, this is called strategic default.

But no matter how the the term gets dressed up, the result is foreclosure and damaged credit. With the many options today, homeowners have more ways than ever to avoid foreclosure. You can read about them at Ask Kate HAFA questions and answers.

Best wishes, Kate

Will HAMP II reduce the interest rate and lock in a fixed rate?
by: By Donna from Ormond Beach, Florida

Kate, We would like to try to get a loan modification but we don't know where to start or whom to trust.

We have a 6.15% Adjustable Rate and our home is worth about half of what we owe. We would like to find a program that will help reduce the loan amount closer to the value of the home and lock in a fixed rate.

Ask Kate answers: Will HAMP II reduce the interest rate and lock in a fixed rate?

Hi Donna,

Unlike HARP, homeowners can only go through their current loan servicer or lender to modify their mortgage terms.

The modification terms may include reducing the interest rate, extending the term to 40 years, deferring interest, and reducing principal.

Usually the modified terms of the existing mortgage stabilize the payment temporarily, many times up to 5 years. But the interest rate and payments can eventually increase. So make sure you understand the terms of the modification.

That being said, there is nothing to say you can't ask the lender for a 30 year fixed rate mortgage plan. But again, read the terms carefully and get copies of any forms that you sign. Verbal explanations mean nothing.

Best wishes, Kate

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