The Home Affordable Modification Program (HAMP) is designed to help homeowners, who are struggling financially, avoid foreclosure by modifying their mortgage. The program provides clear and consistent loan modification guidelines that the entire mortgage industry can use.
Who is it for?
Borrower eligibility is based on meeting specific criteria including (but not limited to):
- The borrower(s) is delinquent on their mortgage or at risk of imminent default (only if the owner of the loan has issued prior approval).
- The borrower(s) must fully document income, including a signed IRS from 4506-T, two most recent pay stubs, most recent tax return, and a signed affidavit of financial hardship.
- The borrower(s) existing mortgage payment (including mortgage principal, interest, taxes and insurance) is greater than 31% of gross monthly income. An example of how HAMP defines mortgage payment relative to gross monthly income is shown below:
Borrower A has a mortgage payment (mortgage principal, interest, taxes and insurance) of $1,500 per month with gross income of $5,000 per month. HAMP calculates housing expense to gross income percentage by dividing mortgage payment by gross income. Applying this calculation, Borrower A’s housing expense is 30% of gross income ($1,500 divided by $5,000 = 30%). Under HAMP, Borrower A’s mortgage payment does not meet HAMP guidelines because it is less than or equal to 31%. Borrower A does not meet the housing expense to income ratio requirement of HAMP for a loan modification.
Borrower B has a mortgage payment (mortgage principal, interest, taxes and insurance) of $2,500 per month with gross income of $5,000 per month. HAMP calculates housing expense to gross income percentage by dividing mortgage payment by gross income. Applying this calculation, Borrower B’s housing expense is 50% of gross income ($2,500 divided by $5,000 = 50%). Under HAMP, Borrower B’s mortgage payment meets HAMP guidelines because it is greater than 31%. Borrower B does meet the housing expense to income ratio requirement of HAMP for a loan modification.
- The subject property is occupied as the borrower’s primary residence. This will be verified through the borrower's credit report and other documentation. Investor-owned properties are not eligible for HAMP.
- The owner of your loan may require that a Net Present Value (NPV) test (also known as an economic test) must be run to compare the NPV of the loan with a modification to the NPV of the loan without a modification.
While the program is designed to help borrowers who are experiencing a financial hardship, not all borrowers will meet the eligibility qualifications established by the Department of Treasury, and therefore, not all borrowers are eligible for a HAMP loan modification.
How does HAMP work?
If all eligibility requirements for HAMP are satisfied, a servicer will take a series of steps to adjust the monthly mortgage payment to 31% of a borrower’s total pretax monthly income. These include:
- Capitalize delinquent interest and escrow payments.
- If necessary, apply 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.
How do I apply for HAMP?
If you are having difficulty paying your mortgage, it is important you take action right away. To apply for a loan modification now, choose from one of our two application methods:
1. Apply online through our new online application and submit all of the required documents right from your home computer! You will need to log in using your existing online mortgage account user ID and password. If you do not have an online account, you can create one by clicking "Register User ID/Password" on the login page.
(Please note: You can opt to fax or mail your required documents even if you use the online application.)
2. Download our paper application to provide your information by hand and submit the required documents by fax or mail.
For more information on eligibility requirements, the financial documents you'll need to submit or additional information about applying for a loan modification, please visit our HAMP Requirements page.
Click here to read important disclosures regarding HAMP.
Visit the IndyMac Mortgage Services Blog to read informative articles and access educational materials about our homeowner preservation programs.
Watch educational videos to learn about HAMP, short sales and how we're helping customers experiencing financial hardship.