HAMP and the Distressed Homeowner
The federal program bankruptcy attorney Lawrence ‘D’ Pew wants you to know about – HAMP – was announced by the U.S. Treasury Department in March of 2009. HAMP helps Arizona bankruptcy filing homeowners struggling with their mortgage payments to save their homes from foreclosure. HAMP stands for Home Affordable Modification Program and it is available to qualifying consumer debtors, even to those who have an Arizona bankruptcy filing under Chapter 7 (liquidation) or Chapter 13 (individual debt adjustment).
How Does HAMP Help the Struggling Homeowner in an Arizona Bankruptcy Filing?
The Arizona bankruptcy filing homeowner may qualify for a HAMP modification of his or her mortgage payments, reducing the monthly payments to affordable levels. The amazing thing is that HAMP is not limited to first mortgages. The program has been expanded to include modifications of junior liens in conjunction with modifications of primary liens. Furthermore, a mortgage servicer can determine whether an unemployed, Arizona bankruptcy filing debtor requesting HAMP assistance will qualify for mortgage forbearance.
Homeowner’s Arizona Bankruptcy Filing and the HAMP Eligibility Test
Whenever a client of the Pew Law Center might qualify to save their home from foreclosure through the HAMP program, we examine potential eligibility. Lawrence ‘D’ Pew applies the five-step eligibility test to establish whether this homeowner in an Arizona bankruptcy filing may apply for the HAMP loan modification program. Here are the five steps that must be satisfied to be considered for HAMP:
● The building is a 1-4 unit home and the Arizona bankruptcy filing debtor must be the owner-occupant.
● The first lien on a one-unit home must be less than $729,750. For a two-unit home, less than $934,200. For a three-unit home, less than $1,129,250. And for a four-unit home, less than $1,403,400.
● The first lien must have originated before January 1, 2009.
● The combined principal, interest, taxes, insurance, and HOA fees on the mortgage liens must be more than 31% of the Arizona bankruptcy filing debtor’s current gross monthly income.
● The Arizona bankruptcy filing debtor must show that the mortgage payment is unaffordable because of a documented financial hardship, such as failing health or extended unemployment.
If the Arizona bankruptcy filing homeowner meets all of five requirements, then he or she is eligible to apply for mortgage modification relief through HAMP. That is not a guarantee, however, that the modification will be granted.
Confirming HAMP Eligibility in the Arizona Bankruptcy Filing
When the Arizona bankruptcy filing homeowner is eligible for HAMP, the Chapter 7 or Chapter 13 financial schedules, tax returns, hardship affidavit, forms, and updated information are sent to the debtor’s mortgage servicer. Upon receipt and review of the financial documentation provided by the Arizona bankruptcy filing homeowner, the servicer verifies eligibility for mortgage modification under HAMP.
The Arizona Bankruptcy Filing Homeowner Must Accept the Trial Period Plan
The mortgage servicer will do a net present value analysis. When the value of the loan to the mortgagee-investor is greater when the Arizona bankruptcy filing debtor’s loan is modified than it would be if the home was sold at foreclosure, then the HAMP trial period plan goes into place. The trial period plan lasts for three months, during which the Arizona bankruptcy filing debtor makes all of the payments. After which, the servicer will enter into a permanent loan modification agreement with the Arizona bankruptcy filing homeowner.