Loan Modification is Stressful, So Know Your Options Government’s HAMP Program May Not Be Best for You

When the Obama administration rolled out the Home Affordable Modification Program (HAMP) in 2009, officials estimated 3 to 4 million borrowers would seek relief from their mortgages through the program amidst the worst recession and housing market collapse in decades.

More than two years later, those projections have proven to be optimistic, to say the least. According to the Treasury Department, about 700,000 homeowners had sought aid from HAMP through the third quarter of 2011.

That’s a long way from 3 million-plus.

“A lot of homeowners who are in dire straits with their mortgages can be intimidated by the confusing process for getting the help they need, but it doesn’t have to be that way,” said Stephfan Nurse, a loan modification expert and CEO of Consumer Education (www.consumereducationonline.com). “The key is knowing and understanding your options. With education, you are empowered.”

Nurse founded ConsumerEducationOnline.com for homeowners seeking loan modifications to get the information needed to navigate the process. It includes a free pre-qualifier, where homeowners can input their figures and determine for which modification program they qualify.

His “Mortgage Reduction” software uses the same guidelines as lenders and helps ensure that financial statements are complete and ready for lender approval. It also coaches homeowners, using video tutorials.

“Applying for a loan modification is a stressful process that can take several months without a lot of communication back and forth from the lender,” Nurse said. “The best way to ease that stress is to know as much as you can about your options and to understand what goes on behind the scenes to avoid simple mistakes.”

Among Nurse’s need-to-know items are:

Make sure a loan modification is right for you: Ask yourself if you are emotionally attached to the home, because a lender likely will extend the terms of the mortgage to 40 years to reduce the monthly payment. If you’re underwater on the mortgage -- if you owe more than the home is worth -- a modification probably is not the answer because of the years added to the note. If you’re not emotionally tied to the home, ask local realtors about options such as short sales.

A loan modification is not a refinance: A loan modification reduces your monthly mortgage payment without requiring any credit checks, appraisals, home equity or closing costs. The only qualification is financial hardship, which can include reduction in income, illness, divorce or any number of trying circumstances.

HAMP is not your only option: The government may want you to think that, but the fact is, more than 70 percent of modifications now are internal modifications made available by the investor holding the mortgage note. The only way to get an internal modification is to ask for one. Worth noting: HAMP bases its modifications on gross income (your mortgage must exceed 31 percent of what you make in a month) while internal modifications are based on monthly net (after-tax) income.

Be complete and thorough in your paperwork: Lenders receive thousands of faxes every day, so make sure your account number is on every page and that all questions and categories are filled out. A document manager who comes across an incomplete form may put it aside and move on to the next one. Just like that, the 30 days you may have to wait to hear from that manager becomes 60 or 90. It’s also best to follow up with the lender weekly.

“The process can be filled with stress, mistakes and misinformation,” Nurse said. “It was a journey to get your house. Be ready for the journey to keep it.”

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Loan Modification is Stressful, So Know Your Options Government’s HAMP Program May Not Be Best for You

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