Homeowners in the Home Affordable Modification Program (HAMP) will now be eligible to earn $5,000 in the sixth year of their modification, under revised rules unveiled by the Federal Housing Administration (FHA)/U.S. Department of Housing and Urban Development (HUD).
Homeowners in the program can already earn up to $5,000 over the first five years of their modification, providing they stay current on their payments. Now they can earn another $5,000 toward their principal in the sixth year, provided they are in good standing. The goal is to keep these homeowners in their homes and current on their monthly payments.
Homeowners will also be offered an opportunity to re-amortize the reduced mortgage balance, which will have the effect of lowering their monthly payment. As of today, approximately one million homeowners with HAMP modifications are eligible to earn the increased HAMP incentive, FHA/HUD reports.
In addition, the Treasury and HUD have introduced enhancements to HAMP Tier 2 and the Home Affordable Foreclosure Alternatives (HAFA) program that will have the effect of creating a ‘safety net’ for homeowners who are having difficulty making their payments. This includes reducing the interest rate for HAMP Tier 2 by 50 basis points, which will enable more homeowners to qualify for a modification, and extending the $5,000 pay-for-performance incentive to HAMP Tier 2 borrowers in good standing at the end of the sixth year of their modification.
HAMP Tier 2 is an alternative modification that provides a low fixed rate for the life of the loan to homeowners who do not qualify for or cannot sustain a HAMP Tier 1 modification.
The Treasury and HUD are also increasing the amount of relocation assistance provided to homeowners under HAFA to $10,000 to better reflect increased rents and the cost of moving in many parts of the country.
HAFA assists homeowners who need to transition to a more affordable living situation through a short sale or deed-in-lieu.
‘Today's announcement signals our commitment to helping more hardworking families continue the American dream of homeownership,’ says JuliÃ¡n Castro, Secretary of HUD, in a statement. ‘These enhancements will expand the opportunity for more folks to stay in their home, stabilizing local communities and continuing our nation's positive economic momentum.’
‘While the housing sector has strengthened in recent years, there are still many homeowners struggling to make their mortgage payments,’ adds Secretary of the Treasury Jacob J. Lew. ‘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.’