HAMP – The Home Affordable Modification Program is NOT working. To date, only 235,000 loans have been modified under this program, while funds have been set aside to modify up to 4 million loans. To find out if you technically qualify for a modification based on HAMP guidelines, click here to access the 5 question quiz on the government website.
The banks have all kinds of excuses why borrowers do not qualify for this program. But the number 1 excuse banks are using is that the guidelines are too rigid. For instance, your mortgage payment cannot exceed 31% of your gross income. First of all, loans were not originally underwritten with this 31% number, so technically this makes almost all borrowers eligible for HAMP. But loan servicers are saying the formula is too narrow and does not take into account all the other debt borrowers have or are piling up during the economic slowdown. CitiMortgage, which services one out of every ten mortgages in the U.S., says the formula is the #1 reason why borrowers are being excluded from the program.
Some banks are using the excuse that they do not actually own the loan, but only service it, so they cannot modify a loan they do not own. This is a tired excuse that most of the major news networks have already covered. Servicers CAN modify loans, regardless of this excuse they are throwing around.
Some servicers are coming up with their own plans for modifying loans. From what I am hearing from my readers, and from other media reports, most of these “plans” are a joke, intended to benefit the lenders, not the borrowers. Here's an example of one such "plan. This lender, Carrington Mortgage is switching people out of fixed rate mortgages into variable rate mortgages, and while deferring delinquent payments, and adding them to the principal, (AND still reporting the borrower delinquent to the credit bureaus), they are putting this borrower at the mercy of the market. This is a stop gap measure at best, and another money maker for the lender in the long run.
Other lenders are allowing borrowers to stay in their homes as renters, while following through on the foreclosure process. This sounds to me like the banks protecting only themselves, while borrowers are really taking it on the chin. Sure, you stay in your house, but the bank owns it, literally can throw you out at their whim. In the meantime, the bank does not have to put the house back on the market during this depressed valuation cycle, or leave it vacant, because they have a renter in there to maintain the property, and carry the debt.
Still other lenders are putting people into modifications on a “trial basis.” While we don’t have details on these “trials,” what we do know is that as long as the bank “modifies” the loan, the collect government incentives, unless the house is sold. This explains allowing the now non-owner of the house to remain in the property. Technically the house has not been sold? But it has – the bank owns it now, not the borrower.
What is clear is that the guidelines for the HAMP program require drastic revision, or it will never work. I am not advocating that all delinquent borrowers should get a 2% modified rate for the life of the loan.
Perhaps dropping the rate to what is truly affordable, given all a borrowers current debt, and current income, for a period of time, perhaps 2 years, and then gradually increasing the payments to a reasonable market level of 5% perhaps for the remainder of the loan, makes more sense than the “innovation” that banks are using now.
In any event, the push is on to get banks to modify loans, so the government is again handing out money to banks to make this happen. The banks slated to receive the largest sums of money for this program right now are Countrywide (now owned by B of A), Chase, Wells Fargo, and Lehmans. I’m sorry, but aren’t most of these the very same banks that just reported hundreds of billions of dollars in profits last quarter? When do we stop rewarding banks for their failures and poor management, and start taking care of the people in this country?
Today is September 1. Congress is back in session, and there is word that HAMP will be addressed again. Maybe they will come up with a plan that will actually work this time?
CNBC reported this morning that banks are easing up on "short sale" approvals to try to assist homeowners facing foreclosures.
If you enjoyed this article, here are others that might interest you:
- A Loan Modification that turned into a nightmare for one unlucky Wells Fargo customer.
- How to get a loan modification and tips to avoid foreclosure
- Is a Short Sale the end of your problems or just the beginning?
Your comments are always appreciated.
Comments
You are right, especially about carrington mortgage they are crooks. They give the borrowers terms that only benefit them and refuse to foreclose on a house in a timely manner, that way they can continue to keep charging fees to the hedge fund investors. There being sued by the state of Ohio, when will our Attorney General do the same.
The only good news I can report is that the media is pouncing all over the problems with the HAMP program, and individual borrowers stories are making headlines. Hopefully this will shake up a few influential people in Congress. I think the real problem is that so many of these programs were rolled out much too quickly without enough input from people who really understand the industry, so we get these weak ineffective programs that contiue to benefit the banks that created this mess in the first place. Just my opinion, but the evidence is overwhelming.
We just made our 4th trial payment when there were only supposed to be 3. Lender says they'll get back to us in 45 days or so, technically there is no modification but hey, keep sending us those payments and we'll think about it.
We really don't know what to do!!! If we're getting kicked to the curb, as our lender could do at any moment, we sure wouldn't be making those payments, we'd be saving them to buy a TENT.
Hi Michigan
It seems that "trial" modifications are getting more and more common as the banks find workarounds to the HAMP modification program which is permanent. If I were you though, I would keep an eye on your credit report to make sure that lender is not reporting any derogatory information on you while they are accepting your "trial payment" amounts. I hate to say it, but I've heard some ugly stories about what lenders are reporting on loans in the modification process. All the best to you. Shelby
I'm having a hard time finding out if a savings account will make me ineligible; we lost more than 75% of our income due to a layoff, and so the mortgage payment is now 100% of our income. However, we have $15,000 in a savings account; will we be denied a modification because we could technically still pay for a few months by exhausting our savings?
Hi Savings
I don't have enough information to answer the question. One of the things the lender will have to determine is if you can qualify for the mortgage at any rate, based on your income. Since I have no idea how much you owe, relative to your income, I can't really answer that part of the question. But, most lenders do require you to use up your savings before you can get a modification. However, this is not technically a HAMP requirement. My suggestion is that you disclose only the information that is asked of you when you apply for a modification, and NOTHING more. Don't mention the savings if the lender doesn't ask.
Good luck.
I am being told that my 2nd mortgage is not included in the 31% ratio for qualifying for a loan mod. Does anyone know if there is any truth to that?
Hey Greg
From my understanding, the 31% applies to the loan you are modifying, but lenders look at 2 numbers, your debt to income ratio for the mortgage you are modifying and your total debt to income ratio - which would include all your debts relative to your gross monthly income. Does that help?
I have First Franklin as my mortgage holder. They offered us a trial modification but the payment was higher than the original mortgage. We decided not to take there offer and the threaten to foreclose. We paid 300,000 for the house and now it's worth 125,000. Now they say they would consider us for the hamp program. We have been waiting since Jan 09. Whats the difference between the hamp and a loan mod?
Juanita
A HAMP program is a modification - it is the government version of the modification program that you hear about all the time - where you go on a 3 month trial - then maybe you will someday get a full modification.
Personally I think the whole program is a farce - the banks are not cooperating - they're coming up with every version of the program they can think of - and every excuse they can think of to not modify loans. You are very underwater Juanita - at this point I don't know what to tell you. As i said in the article, the whole program is not working. Good luck though. You might be one of the few who actually does get your loan modified. Be aware though, that if you go into the HAMP program, your modification will originally be a 3 month trial.
i cannot believe how we live in supposedly the best country in the world America and yet they don't do anything to help you out. President Obama stated that the banks received all this money to help people with their mortgages and instead the banks are keeping it for themselves!! Thats why this country is getting worse and in a big mess because of all the crooked and corupt people like in countrywide mortgage & even bank of america is just as bad!
has anybody been denied from the hamp program? I was and went from being 2 mos delinq to 5 mos and now in foreclosure.
I have my mortgage with Wells Fargo and I have been going back and forth with the HAMP program. My income as finally fit within the 31% guidelines and now they are telling me that the value of my house is not in line?? When did that become a qualifying or disqualifying factor?
I've been helping my brother-in-law (English is his second language) to secure a loan modification through Saxon Mortgage Company since DEC 08. He was approved in FEB 09 for a loan mod of 5.6%, down from 8.25%. However, Saxon NEVER SENT HIM the paperwork, then cancelled the modification when he failed to sign and return it. Saxon admitted its error, but inexplicably still required that we begin the process all over again. So we did. The second attempt was also cancelled when we failed to submit my brother-in-law's Social Security Disabilty paperwork DESPITE my repeated calls to Saxon informing them that he is NOT ON SS Disability. No matter. Cancelled. I got him signed up for HAMP at Saxon in early May. Here it is 11 months later, and he is STILL without a loan modification, although the HAMP "Trial Period" was supposed to last just 3 months. This is disgraceful. We are chasing our tails with this company, but what else can we do -- we've come this far; it's no time to give up....
The biggest problem (one of many) at this time with these "govt." programs is that there isn't any regulatory or enforcement agency to insure the banks comply. The banks can deny or ignore your HAMP application and there isn't anyone to hold them accountable. Geez..we the taxpayers bail out banks in their time of need, they give themselves bonuses and triple their lobbying efforts then...they don't "help" the very taxpayers that helped them...gross...
I participated in a making house affordable with Wells Fargo (HAMP); during the "trial" process I received numerous foreclosure letters from Wells Fargo and the State of Maryland .
This was a shock to me because I made the payments that Wells Fargo gave on time. To my dismay, I find out that Wells Fargo has me as owning $7000 and being over 90 days past due. How? I have no idea, I was making the agreed upon reduced payment. But, the payments were never applied to my account. When, I asked Wells Fargo representatives about the letters and my account, I was informed to disregard the letters that I was not in foreclosure and that I would be given a new account during this process.
When I got an alert form my credit monitoring company that I had negative information posting to my account, I realized that this was a problem. I called Wells Fargo numerous of times to get this issue resolved to no avail. Wells Fargo repetitively said that I owe $7000. They refuse to cross
reference the HAMP account where the reduced payments where being made with the original account that was being reported to the credit bureaus. It appears that they are trying to give people the run around.
To make matters worse, they are asking for an accelerated payment of $7000, which I do not even owe. I have made all of my payments on time during this process.
Over the 6 years that I have had the loan, I’ve never been 30 days past due. So, now, thanks to the Making homes afford program and Wells Fargo, I can not obtain new credit and my current creditors are slashing my credit limits. I am in a worse situation then when I started the program.
I am not sure, but, I don’t think the program was implemented to make people lives worse. I’ve browsed the internet and found numerous similar complaints and stories.
My husband & I did this loan modification with Wachovia first. After we signed the approval, no invoice, we were 5 months late & were told we didn't qualify after we signed & faxed back the paperwork. Have the confirmation too. So we paid the 5 months & started the process again this time through Wells Fargo. Guess what? Same f***** thing. Now we owe another $6900.00 & no response from anyone at Wells Fargo regarding our new monthly statements. We are still getting the wonderful "pick-a-payment" from Wachovia. Isn't Wachovia done? We're all screwed!!!!!
Before 8 this morning, I received a call from a lady involved in a short sale. She says the bank wants them to bring $10,000.00 to closing, OR pay $30,000.00 back over 15 years. No healing for 15 years!!!
Why the huge discrepancy in the money? The people sign a promissory note at closing. The "sellers" will end up paying 3 or 4 hundred dollars a month for the next 15 yrs.
These "trial" modifications are a bastardization of the HAMP program. There is only ONE way which we can make this work, and fix the housing crisis.
Force the lenders to lower the interest rate to the prevailing "preferred" rate, tack the arrearage on to the back end of the mortgage, and LET THE PEOPLE PAY. People aren't asking the lenders to lower the principal, they're asking to have their payments made affordable.
After the bailout, the banks are behaving dishonorably by "modifying" the HAMP program in every way which benefits them. They've the best minds they can buy working on ways around HAMP.
We're in a depression, folks, and don't let anyone tell you differently. The "New Program" the President announced last week WON'T work, because it requires current payments, or cash to make them current, and people DON'T HAVE IT. If they did, they wouldn't be in this mess. They never dreamed that by doing exactly what the lenders told them to do that they'd walk themselves right into foreclosure, but this is a PLANNED foreclosure crisis. PLANNED BY THE BANKS!
I have a perfect payment history, am current, had a 54% income loss when I had to take a lower paying job, and have burned my savings trying to stay above water. To top it off, I don't have the equity in my house to refinance into a fixed mortgage from the ARM I am currently in - which has just been raised for this year from 3.625% to 4% starting in April. I meet ALL the criteria for HAMP, yet my lender has denied me for a modification. We all need to make some serious noise about this. It's the same shady behavior that got our economy into this mess to begin with. They get away with it because people don't know better. I'm not letting that happen to me.
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