How does HAMP work?
When being considered for HAMP, a borrower is run through a set of calculations to determine modification eligibility and provide the borrower with a post modification payment of principal, interest, taxes, insurance, and applicable association dues (PITIA) that ranges between 10%-55% of the borrowers total gross monthly income. The steps included in this process may vary by borrower and include some or all of following:
- Capitalize delinquent interest and escrow payments.
- If necessary, apply a principal reduction to a portion of the principal balance. This step is applied only if the current loan to value (LTV) ratio is greater than 115%. Borrowers who are eligible for HAMP but whose loan to value ratio is equal to or less than 115% are not eligible for principal reduction.
- If necessary, reduce the interest rate to as low as 2.000%.
- If necessary, extend the term of the loan to 40 years.
- If necessary, forbear (defer) a portion of the principal as a balloon payment and waive the interest on the deferred amount. The balloon payment is due with the final payment of the loan.
In addition to the above, a proposed modification is run through the Net Present Value Test (NPV Test), which is financial model developed by the Department of the Treasury to compare the value of a delinquent loan, assuming foreclosure, to its value after the loan is modified. The test requires a mortgage servicer (such as IndyMac Mortgage Services) to input twenty-eight unique elements of data (referred to as NPV Inputs) about the borrower's financial and mortgage information. It is then combined with additional data from a financial model, developed by the Department of the Treasury, to estimate the cash flow that the investor (owner) of the loan is likely to receive if the loan is modified or not modified. The results of this test determine whether a borrower is approved or denied for the Home Affordable Modification Program (HAMP) based on the NPV requirements for HAMP.
This is a communication from a debt collector attempting to collect a debt. Any information obtained will be used for that purpose. However, if you have filed a bankruptcy petition and there is either an “automatic stay” in effect in your bankruptcy case, or your debt has been discharged pursuant to the bankruptcy laws of the United States, this communication is intended solely for informational purposes.