WASHINGTON (12/8/14)--Homeowners in the U.S. Department of Housing and Urban Development and Treasury Department's Home Affordable Modification Program (HAMP) can now earn additional money as part of their loan modifications.
HAMP was started in 2009 by the two agencies as a way to provide relief to homeowners facing financial hardship. The program allowed those homeowners to combine lower interest rates and modified loan terms to reduce monthly payments. Homeowners who remain current after the modification are eligible to earn up to $5,000--to be applied to the loan's principal--over the first five years of the modification.
The revised guidelines will allow all homeowners in HAMP to earn $5,000 in the sixth year of modification, allowing for a total of $10,000 to be taken off the principal. Homeowners also will be offered an opportunity to re-amortize the reduced mortgage balance to reduce monthly payments.
According to HUD and the Treasury, approximately one million homeowners with HAMP modifications will not be eligible to earn the second $5,000.
"The changes we are announcing today offer meaningful incentives for borrowers to stay current in their modifications, increase their opportunity to build equity in their homes, and provide vital safety nets for those facing greater financial strains." said Secretary of the Treasury Jacob J. Lew.
The agencies also announced changes to HAMP Tier 2 and Home Affordable Foreclosure Alternatives (HAFA) programs.
HAMP Tier 2 is an alternative modification that provides a low, fixed rate for the life of the loan for homeowners who cannot qualify for the original HAMP modification. Interest rates for HAMP Tier 2 borrowers have now been reduced by 50 basis points, allowing more homeowners to qualify for a modification. The $5,000 incentive for borrowers in good standing has been extended to the sixth year of modification.
HAFA offers homeowners needing to transition to a more affordable living situation through a short sale or deed-in-lieu. The two agencies have increased the amount of relocation assistance provided to homeowners to $10,000 from $3,000. According to the agencies, this is to better reflect increased rents and the cost of moving in many parts of the country.