Many different acronyms get thrown around frequently in the business world. The banking world being one of the largest cogs in private sector it is no wonder confronting your mortgage company and getting a clear understanding of what they are trying to say or who you should be dealing with is so crucial. Now as if that wasn’t volatile enough get the government involved (IRS, INS, GSE, ETC. — It doesn’t even need to be government run and it becomes an acronym) and the letters start flying like its alphabet soup day at the children’s school today.
What is the HAMP review?
Home Affordable Modification Program (HAMP) or what some people refer to as MHA or Making Homes Affordable (from the Treasury’s www.Makinghomesaffordable.gov) is the review that the lenders put homeowner’s through in order to gather whether it would be best to foreclose or to find a resolution with that homeowner. The program was not put in place to help homeowners as much as it was put there to establish where or not the bank will make more money if they foreclose. This is where the NPV comes into play and the Loss Mitigation departments at the banks just got a little better at telling you no thank you. There are many factors that come into play including the property’s value, the homeowner’s hardship (generally found on the hardship letter), along with the borrower’s finances and many other factors. Failing in the Net Present Value (NPV) test can disqualify you from assistance under this program and from future attempts so it is important to present the best information you can for the factors that you do have control over.
What is the HAMP Waterfall Matrix?
For those loans that do qualify the servicer/lender is supposed to attempt resolution in a hierarchy or what is referred to as the Waterfall Method. The first thing they look into for those borrowers that are currently delinquent is the capitalization of as much as possible (Total Payments and Fees due and sometimes this includes attorney fees and costs having to do with the foreclosure process if it had commenced). The next stop in the waterfall method is the drop in interest rate. This is the place that everyone talks about and the only one that everyone can remember. The interest rate is famously known for it being floored by the HAMP (Treasury) program at 2%. Now, there have been variations to how this 2% is applied. The interest rate drop can vary from being a permanent change to being only temporary adjustment. The adjustable modification can also vary to be a fixed period of time (generally 5 years) to an immediate adjusting payment after the first year and every year after that for the five years that eventually caps off (caps may vary from loan to loan). If they cannot find an affordable payment for the homeowner by even taking the monthly mortgage payment to the floor interest rate of 2% then the next step suggested by the treasury is to extend the life of the loan. This has currently been maxed out at 40 years according to the HAMP program but even with a slight extension can make a different to making the payment affordable. This though doesn’t always solve the issue so a principal forbearance is the last step on this waterfall before it hits the excessive forbearance river of decline. The principal forbearance is much like a silent second where a portion of the loan is ghosted out and seeks no payment until either the first is paid off, the home is refinanced or the property is sold.
Makinghomesaffordable.gov, why are they giving away my information?
It is possible that you have advised them that you wanted to speak to someone and now the flood gates have opened. Once you sign up for the Treasury’s assistance professional they give out your information to everyone. What’s scary is people still aren’t finding the assistance that they are looking for and in fact they are getting scammed by attorney’s from other states (Florida, cough, cough).
Are you experiencing difficulties? Have you gone through this and now the Treasury’s goons won’t leave you alone?! Post your comments, questions, experiences below. If you have a more private question or want to speak to someone directly give us a call at 888-934-3444 and one of our specialist can speak to you about what is happening on your file. If necessary we can even call your lender on the spot (depending on availability).