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Homeowners use this FREE HAMP LOAN MODIFICATION eligibility checklist to see whether you qualify for a Loan Mod

Eligibility
Eligible loans must be originated on or before January 1, 2009. New borrowers will be accepted until December 31, 2012. Program payments will be made for up to five years after the date of entry. The mortgage loan must be secured by a one- to four-unit property, one unit of which is the borrower’s principal residence. Cooperative-share mortgages and mortgage loans secured by one-unit condominiums and manufactured homes26 are eligible for the HAMP. Investor properties, second homes, vacant, and condemned properties are not allowed. There is no minimum or maximum current LTV ratio for eligibility purposes.
Current UPB limits (pre-modification and pre-capitalization) are as follows:
o
1 Unit $729,750
o
2 Units $934,200
o
3 Units $1,129,250
o
4 Units $1,403,400
The servicer must apply the standard waterfall to all loans that meet the basic eligibility requirements. This waterfall adjusts the borrower’s current loan terms in order to achieve a target front-end DTI of 31%. The waterfall step that results in a front-end DTI closest to 31% (without going below 31%) will satisfy the front-end DTI target.

Step 1: Calculate Current Debt to Income (DTI)
Calculate the borrower’s front-end DTI based on current mortgage payment and gross monthly income. If the loan is an adjustable-rate mortgage (ARM) or interest-only mortgage (IO) and the interest rate is expected to reset or recast within 120 days, DTI is calculated as follows: For non-GSE loans, amortize the loan using the reset interest rate, current UPB, and the remaining term. For GSE loans, use the current monthly payment.

Step 2: Capitalize Arrearage
If the loan has any arrearage, the arrearage is capitalized to determine the new UPB. Items that may be capitalized include accrued interest, past-due real estate taxes, insurance premiums, delinquency charges paid to third parties and not retained by the servicer or its affiliate, and any required escrow advances. Late fees are not capitalized.

Step 3: Principal Forgiveness
There is no requirement to use principal reduction under the program, and it is not a formal step in the HAMP Standard Waterfall process. However, servicers may forgive principal to achieve the front-end DTI target. Principal forgiveness can be used on a stand-alone basis or before steps 4, 5, or 6 in the Standard Waterfall process. Principal forgiveness is applied to the UPB, and subsequent steps in the Standard Waterfall are carried out until 31% target DTI ratio is achieved. If principal is forgiven and the interest rate is not reduced, the rate will be frozen at its existing level and treated as a modified rate for the purposes of the interest rate cap.
In the event of principal forgiveness, the Payment Reduction Cost Share continues to be based on the change in the borrower’s monthly payment from 38% to 31% front-end DTI ratio and is limited to five years.

Step 4: Rate Reduction
Reduce note rate in increments of 0.125% to get as close to the target DTI of 31% as possible, without reducing the borrower’s DTI below 31%. The new rate cannot be lower than 2%. If the target DTI is met and the resulting interest rate is higher than the interest rate cap27, then the resulting rate will be the note rate for the life of the modification and the payment (P&I) will be fixed for the life of the loan. If the resulting rate is below the interest rate cap, the reduced rate will be in effect for the first five years followed by annual increases of one percentage point per year (or a lesser amount as needed) until the interest rate reaches the interest rate cap. Borrower’s monthly installment will be revised annually, if and when there is an interest rate reset, based on the statement above. If the target DTI cannot be reached at the 2% rate floor, term extension is considered.

Step 5: Term Extension
Re-amortize and extend the loan to a maximum 40-year term in monthly increments to reach as close to the target 31% DTI without going under. The modification term should not be lower than the current remaining term. If the loan’s current remaining term is greater than 480 months, use the remaining term as the modification term. No term extension should be given. If the target DTI cannot be reached with the maximum term extension, then principal forbearance is considered.

Step 6: Principal Forbearance
Principal is forborne until the target DTI is achieved. The forbearance amount is added as a balloon payment to the end of the loan and no interest is collected on the forbearance amount. If the option to defer is selected, the servicer/lender shall forbear on collecting the deferred portion of the Capitalized Balance until the earlier of:
o
maturity of the modified loan,
o
a sale of the property, or

o a pay-off or refinancing of the loan

If the modification is NPV negative and the servicer chooses to modify the loan, forbearance can be no more than the difference between the unpaid balance and the current property value. If the target DTI cannot be reached with principal forbearance, principal forgiveness can be considered.