Like any loan, a mortgage can be restructured or modified. A mortgage modification is when a mortgage is modified from the original terms agreed to by the borrower and the lender in the contract. Generally, homebuyers make the leap to homeownership by securing a traditional mortgage loan. If the owner(s) struggle to make payments, they may seek a mortgage modification to make the terms more favorable.
How Does Mortgage Modification Work?
One popular avenue for mortgage modification is The Home Affordable Modification Program (HAMP), a government program that was created to give aid to homeowners in states hit hardest by the subprime mortgage crisis. It can help homeowners adjust their interest rate, extend their term and reduce or forebear the principal of their mortgage. HAMP is set to expire December 31, 2016.
The deadline is December 30th, and the Modification Effective Date must be on or before September 30, 2017.
Second Mortgage Modification
Some homeowners may also have a second mortgage, a home equity line of credit (HELOC) or home equity lien. If they are struggling to make their mortgage payments and need to have their primary mortgage modified, sometimes they will need to modify their second mortgage as well.
That’s why the Department of the Treasury also created The Second Lien Modification Program (2MP), another part of the Making Home Affordable Program that accomplishes the same goals as HAMP, only for second mortgages, home equity liens, or HELOC.
Under 2MP, homeowners who modified their mortgage under HAMP that have a second mortgage on the same property may be eligible to modify or eliminate the principal on their second mortgage if they meet certain requirements.
Like the HAMP program, the deadline for the 2MP program is December 30, 2016.
MHA Mortgage Servicer & Investor Incentives
To encourage loan servicers and investors to take part in HAMP and 2MP, the government has created numerous financial incentives. As the deadline for both programs are rapidly approaching, a flood of applications may be right around the corner. Here’s what you need to know:
• Read the Treasury’s Making Home Affordable Incentive Eligibility Guidelines
• Read the Treasury’s Making Home Affordable Compensation Matrix
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