New HAMP Incentives Benefit Homeowners Big Time

by Shannon from Dayton, OH and by Lucia from Canyon Lake, CA

Ask Kate about four new HAMP incentives that will benefit struggling homeowners big time: Making Home Affordable (MHA) apparently read the memo that rising interest rates for homeowners ending their fifth year of the HAMP program are going to increase the banks' default rates. In order to prevent a new avalanche of foreclosures, MHA is offering generous financial incentives to HAMP borrowers.

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New HAMP Financial Incentives

Here are the details on the new HAMP financial incentives of December 2014, designed to reward borrowers for timely mortgage payments by building equity, lowering payments, improving rates, and creating a safety net.

Quit Claim Deed and Loan Assumption During Loan Modification
  1. Equity: In year six of the loan term, up to $5,000 will be applied as a reduction to the modified mortgage balance, in addition to the existing $5,000 incentive accrued during years one to five. Yes, that's a total of $10,000 to eligible borrowers for making timely house payments.

  2. Affordability: After the principal reduction, eligible homeowners can request a re-amortization of their loan balance to lower monthly payments.

  3. Interest Rate: For those with a fixed rate, eligible borrowers may find their rate can be lowered by a half point (.5 percent).

  4. Safety Net: Homeowners who have used HAMP to modify mortgages but are no longer able to afford their homes may be eligible for a cash payment of $10,000 by transitioning into either of the Home Affordable Foreclosure Alternatives (HAFA), Short Sale or Deed-in-Lieu of Foreclosure versus walking away from the home.
So call your loan servicer today to determine your eligibility for any or all of the HAMP incentives. Good luck and let me know how it goes!

Now for Shannon's HAMP quit claim question and Lucia's 2nd mortgage modification question...

Loan Assumption with Quit Claim Deed During Loan Modification

By Shannon from Dayton, Ohio
Quit Claim Deed and Loan Assumption During Loan Modification

Hello Kate,

I am trying to help a friend out. He went through a divorce last year and in the divorce decree it stated that they were going to let the house go into foreclosure. Neither could afford it alone but that his ex wife was to stay in the home until the foreclosure.

They were just notified of the foreclosure process but his ex wife told him that the lender agreed to work with her on a modification. The bank has asked for a quit claim deed in order to just consider her income for the modification but my friend is reluctant to sign.

I am a licensed Real Estate agent but this is not my area. It is my understanding and some of my colleagues if he signs the quit claim deed, he is still on the hook for the mortgage but will no longer have interest in the home. In which case his income-to-debt ratio will be too high to ever get any kind of loan so long as she is in the house.

My advice was to sign the quit claim deed simultaneously with an assumption of the loan as part of the modification. Is there any other way around this? It really would be best if the kids could stay in the house.

***zz-portrait-left.shtml*** Ask Kate answers: Loan Assumption with Quit Claim Deed During Loan Modification

Hi Shannon,

Yes, signing a quit claim deed releases the interest in the property but not the mortgage, giving the ex-spouse full responsibility for the debt with no asset to back it up.

Quite a precarious position for your friend. But I think it's an excellent idea to ask the lender to add loan assumption to the mortgage modification conditions.

I frequently receive questions on quit claim deeds from numerous angles and both sides of the party. For further thoughts and help, please read: Best wishes to your friend and thank you for your question,

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How Do I Modify My 2nd Mortgage with HAMP 2MP

By Lucia from Canyon Lake, CA
How Do I Modify My 2nd Mortgage with HAMP 2MP

Hello Kate,

Presently I have a Wells Fargo HAMP 1 modification from 2011. I also have a HELOC with the same servicer that was not modified.

My HELOC will recast this year and I would like to apply for the 2nd mortgage modification program (2MP) which Wells Fargo participates in.

When I called Wells Fargo, they told me I have to re-qualify for the 1st mortgage modification again, including all new paperwork.

But I only want to modify my $23,000 HELOC. Do I have to go through this miserable task again? What are my options? It seems ridiculous to have to re-qualify for HAMP 1 in order to get 2MP.

***zz-portrait-left.shtml*** Ask Kate answers: How Do I Modify My 2nd Mortgage with HAMP 2MP

Hi Lucia,

Making Home Affordable's 2nd mortgage modification, 2MP, is not a stand-alone program. 2MP must be applied for during or directly following the 1st mortgage modification.

This is because there is no consideration of loan qualifications at the 2nd mortgage level. In fact, your loan approval is merely pulled over from the 1st mortgage modification package.

I do understand the process can be miserable. But perhaps you could apply for HAMP Tier 2 and 2MP at the same time and lower both payments. Hopefully, this could lessen the misery of applying once again for HAMP!
Go here to get an insider's view of the HAMP Tier 2 modification process.
Best wishes,

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When should I receive $1,000 off my principle balance?
by: Matthew P.

Hello. My mortgage was approved for HAMP by Bank of America. It was sold last summer to Shell Point. However, it has been 1 year since a permanent modification went into effect.

When should I receive $1,000 off my principle balance? My original mortgage was between $1059 and 1063 a month and it was reduced to $973. All payments include PMI. Still, this is more than 6%.

I hope I qualify for the reduction and nobody knows about the additional $5,000 after the sixth year. The HOPE Hotline counselors said that it depends on the loan and HAMP guidelines.

Hi Matthew, Kate here...

The United States Treasury sends compensation to lenders to reduce principal balances of homeowners who have modified mortgages (still non-Fannie and non-Freddie as of 3/2015) under the HAMP program.

As long as the trial period ends successfully and borrowers are timely on payments, funds up to $1000 should begin to accrue each year for 5 years, payable at the end of each year.

Read the guidelines for principal reduction at Principal Reduction Alternatives for non-GSE Mortgages.

I don't know how close you are to the end of year one but if I were you, I'd be on the phone to Shell Point asking for the reduction. For all you know, your incentive could be languishing over at Bank of America, never having reached Shell Point.

It's too early to know exactly when lenders will cough up the additional onetime payment. They only commit to "in the 6th year". So it seems wise to assume that it won't be before the 6th year's 12th payment has been made... and then some.

Best wishes, Kate
Hamp modification following a divorce
by: Debra from Columbus, Ohio

I received the deed to our home following the divorce. We both are on the note and mortgage. I was then allowed to apply for a modification.

They did the modification solely on my information. My ex had no input or his information was not used in determining the modification.

They did approve the modification. I was given a 40 yr mortgage, for an amount $23,000 more than the original note signed by us both. I tried to get them to remove his name but they said they could not.

In reading my original note, it stated that they could remove any borrower and make the remaining one responsible. So I don't understand why they could not. The mortgage stated that no amendments can be done without all parties involved signature.

I am concerned that at some point my ex can complain about what was done, and thus make the modification invalid, and force me to attempt a refinance which I could not afford, or may not be allowed. I see from his point, to be now in debt for 40 years on something he had no input into doesn't seem right.

The modification was done solely on my information, thus stating it was what I could afford. He is also non-attachable, so even in default they could not go after him. But, because he is on the note, he has the right to obtain all information about this loan and me.

I believe used the 1099 for taxes. I want to know if the bank was allowed to modify a loan without his permission. If they indeed could have removed his name? What is any possible issue could I have in the future because of this situation?

Hi Debra, Kate here...

You raise valid concerns. Ideally, these questions should have been answered by your lender and divorce attorney in writing before your modification was finalized.

Because the questions you are seeking are of a legal nature, you'll need to go back to the lender and perhaps contact your divorce attorney.

If you feel the lender did not handle your modification properly, you can file a complaint with the Consumer Finance Protection Bureau. Go here for more info on CFPB: Loan Servicer Bungles Hardship Loan Modification.

Best wishes, Kate

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