Loan Modification

HAMP Loan Modifications and ?In-house? Modifications, What Is The Difference?

By Andrew

A loan modification is a loan modification, right? If it helps you avoid a foreclosure on your home it is good news, right? Not necessarily. It is a little more complicated than all that.

HAMP is a Government sponsored loan modification program. This might not give you much peace of mind but the truth is that mortgagees that are part of this program must follow certain requirements in order to receive the incentives the Government offers for loss mitigation actions, another name for loan modifications.

These requirements have been recently (Nov. 23^rd 2009) updated and include:

1)      Mortgagees must reduce the interest rate of a loan modification to the market rate. Market rate is defined by the Government as the most recent Freddie Mac Weekly Primary Mortgage Survey Rate for a 30 year fixed-rate conforming mortgage.

2)      The Mortgagee must re-amortize the total unpaid amount due over a 360 month period from the due date of the first installment of the modified loan. This is code for: the bank has to offer you a 30 year fixed-rate loan at the market rate.

However, if you go for an in-house loan modification or even for a mortgage refinance your mortgagee is not required to follow these rules. This doesn?t mean the in-house mortgage modification will be bad or any worse than the HAMP loan modification. You might find your mortgage provider is really generous and wants to improve the Government?s deal out of the goodness of his heart. No? You don?t think that is likely?

The problem is that even the relatively good terms HAMP loan modifications offer are no guarantee you will get approved or that you will even get a decision on your loan modification before your mortgage forecloses. Lenders use this fact to push borrowers into choosing a bad loan modification in the belief that a bad loan mod in the hand is worth two in the bush. Is that true?

The alternative to the HAMP loan modification or in-house mortgage modification is to simply walk away from your mortgage, but that is another story.

In conclusion, only you can decide if a loan modification is the right move for you, but if you do decide to go for a loan modification it is most likely you will get a better deal if you go with a HAMP loan modification. Unfortunately many banks are using the fact that HAMP loan modifications are slow and hard to get to push their own in-house subprime loan modifications.

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1. HAMP, Way Out For Delinquent Borrowers And Those Without Fannie
2. Loan Modifications Are They Worth It ? An Overview In Simple English
3. Loan Modifications, A Loose, Lose Story With No Winners

1. HAMP, Way Out For Delinquent Borrowers And Those Without Fannie
2. Loan Modifications Are They Worth It ? An Overview In Simple English
3. Loan Modifications, A Loose, Lose Story With No Winners

Full post as published by Blown Mortgage on January 31, 2010 (boomark / email).