Recently the Treasury department announced enhancements to the Making Home Affordable Modification Program HAMP. This change provides additional avenues and resources for homeowners who are struggling with their mortgage. The changes are geared to providing temporary mortgage assistance and relief to borrowers who are currently unemployed. These changes encourage banks to write-down a portion of the mortgage debt as part of the HAMP modification process. These changes should allow more borrowers to qualify for a modification through HAMP and provide a more affordable housing payment once the loan modification has been completed.
Borrowers who are unemployed and meet the eligibility criteria will be able to have their mortgage payments temporarily reduced to an affordable level for a period of at least 3 months and as long as 6 months for some borrowers as they look for a new job. If these homewoners are not able to find a job before the temporary assistance period ends or if they are able to find a job but with a reduced income, they will then be evaluated for a permanent HAMP loan modification or they may be eligible for HAMP's other alternatives to foreclosure.
In addition the government will be incentivising principle balance write downs by matching dollar for dollar of the principal write down by the servicers and investors. These principal reductions and incentives will be earned by the borrower and the lender based on a pay-for-success structure.
