Under the newly proposed additional provisions of the Home Affordable Modification Program (HAMP), additional resources will be provided to struggling homeowners, which may help avoid foreclosure or a bankruptcy filing.  The new provisions focus on temporary mortgage assistance to certain unemployed homeowners, encourage servicers to write-down mortgage debt as part of a HAMP modification, allow more borrowers to qualify for modification through HAMP, and help borrowers move to more affordable housing when modification is not possible. The changes will be implemented in the coming months. 

Unemployed borrowers, meeting certain eligibility criteria, may request that their mortgage payments be temporarily reduced to an affordable level for a minimum of three months, and up to six months for some borrowers, during the search for a new job.  If homeowners fail to find a job before the temporary assistance period is over or if they find a job with a reduced income, they will be evaluated for a permanent HAMP modification or may be eligible for HAMP’s alternatives to foreclosure program. 

During the period, the proposed provisions state that the reduced payment would be set at thirty-one percent of monthly income or less while homeowner is unemployed via a forbearance plan.   The temporary assistance plan offered for a minimum of 3 months, and up to six months for some borrowers, subject to investor and regulator guidelines, ending when borrower becomes re-employed or scheduled assistance period expires. Borrowers who become re-employed during the scheduled assistance period and whose mortgage payment is greater than thirty-one percent of their new gross monthly income must be considered for HAMP. 

For banks participating in the Making Home Affordable Program are required to offer assistance to all 

unemployed borrowers who meet the following criteria: 

o Homeowner’s mortgage meets HAMP eligibility requirements, including 1) house is owner-occupied 2) 

loan balance is below $729,750 and 3) loan was originated before January 1, 2009. 

o Homeowner must provide evidence of receiving unemployment insurance benefits.  

o Homeowner must request temporary assistance in the first ninety days of the delinquency.   

At the end of the temporary assistance period, homeowners who have a mortgage payment greater than thirty-one percent of their monthly income must be considered for a permanent HAMP modification.  

o To receive a permanent HAMP modification, homeowners must be current on assistance plan payments, must verify qualifying income with standard documentation, and must meet all other HAMP underwriting requirements including a net present value evaluation.   

o Unemployment insurance will not be counted as income when homeowner is evaluated for HAMP.  

o If the scheduled assistance period ends without re-employment, the homeowner may be considered for HAMP alternatives to foreclosure including short sales and deed-in-lieu of foreclosure. 

The proposed new additions to the HAMP program seeks to avoid foreclosure or bankruptcy filings by borrowers.  Many of the new provisions will need further clarification before implementation, but HAMP may provide debt relief to thousands of borrowers.