This is a question we get asked all the time. Clients want to know what loan modification programs are available for them to apply to and to get approved for. It’s a tough question. I’m going to categorize them into 2 main categories for you. The first is government related programs such as HAMP (Home Affordable Modification Program) which is most common and the other is Lender In-house programs meaning not managed by the government but something the lender offers directly like Well Fargo, Chase, Bank of America, Nation Star. The most desirable frankly, is the HAMP program and the government related programs. There are a lot of restrictions on who can qualify for a HAMP program.
There is a limitation on the mortgage amount and there are also some pretty severe limitations on disposable incomes and qualifying. So the HAMP programs are very difficult to qualify for. It’s never a guarantee even if you seem to fit the parameters of the HAMP program, it’s never something that we can say, Oh you definitely qualify for HAMP because there are a lot of unknowns, there are a lot of variables and factors that we can’t predict. For our office, HAMP is always the number one choice because it comes with the lowest interest rate. A typical HAMP interest rate can be as low as 2 percent which is incredible. Who wouldn’t want a 2% mortgage?
So number one option is your HAMP modification and other government programs. Other government programs might be VA programs, other government employee programs and that sort of thing. There are some other government programs but the most common is HAMP and if you can qualify for HAMP, you are doing great. Most people however, do not qualify for HAMP and so they are left with working with the lenders’ in-house programs which isn’t necessarily bad. I’m cynical about lenders for the most part but I do genuinely believe they make an effort to match the borrower with the most appropriate program, the program that is going to give them the lowest payment.
So there are a lot of factors that go into whether or not they will approve you for HAMP or for in-house programs or for which in-house program. The in-house programs also vary with the loan amount. So there are different in-house programs for your $300,000 or $400,000 loan than there are for your $800,000 or $1,00,000 loan amounts. Those are the different types of loan modification programs and also the other thing that sometimes is very helpful is an upfront contribution and what I mean by that is putting up some good faith money upfront, a few payments at once to make the lender feel more secure, that you are truly committed to this modification and you are not going to just make one payment and default again.
Loan modification programs often are a moving target but I think I gave you a good summary, at least a good starting point. If you have any more legal questions, please feel free to call the office or email us. We are always happy to answer your questions. I will even make a video for you if you prefer it that way.