Unemployed Home Loan Modifications

The Home Affordability Modification Program (HAMP)  is now offering mortgage relief for the unemployed.  It is a short term plan meant to give the borrower time to find a job or chose other options. The housing crisis has moved from the sub-prime market to the blue and white collar worker.  Closing and cut backs have sent many workers that once had good credit and positive cash flow spiraling into the world of foreclosure.

The terms of the program are very simple. The mortgage payment principal interest taxes and insurance (PITI) will be reduced to 31% for a period of 90 days.  At this writing there is an automatic provision to extend for another 90 days if the borrower is still unemployed. For example if your PITI payment is $1000 it will be reduced to $310   every one gets the same terms.

The borrower must meet the following qualifications:

The loan must be eligible for the HAMP program. This means that the lender must allow modification. The loan must not have had a previous HAMP modification. An in house modification by the lender is ok. The PITI must be more than 31% of the borrower’s income including co borrowers. Current beacon score may affect qualification this seems to vary but if the score is over 600 it may affect qualification. The borrower must not qualify for a regular HAMP modification The borrower must pass the imminent default test. 

This is a formula used by the government have no idea how it works however for this modification low income is will not disqualify you. The loan can not be more than 60 days past due at the time of applying for the modification. The loan can not have had a failed HAMP trail payment in the past. Borrower can not be in an active bankruptcy with out reaffirmation of the loan Borrower must be receiving unemployment when the first payment is due. The person receiving unemployment must be on the loan.

If the borrower is accepted in the program the following will take place;

PITI payment will be reduced to 31% of the regular payment. The 69% will beheld as a deficit in the account The loan will not incur late fees during the modification period The loan will still show as in default. If the loan is in a current HAMP trial payment it will be suspended while the short term plan is in effect.

The goal of this program is to give the unemployed borrower time to find a job or chose other options regarding the property. The plan is that the borrower will find a job then qualify for a regular HAMP modification.  The unpaid 69% of the PITI will be capitalized the loan would be placed in the HAMP matrix the borrower will have a new loan they can afford and every thing works out.

There are some dangers in this program. If the borrower can not find a job before the short term modification ends they will be deeply in default.  The 69% will become part of their total amount due. Or, if they find a job but do not qualify for the HAMP program this could because they make too much money or too little. 

This is why it is advised that while in the short term unemployment modification the borrower should look at other options regarding the property. These include sale even possible short sale if it comes to it. Deed in lieu of is when the borrower surrenders the property rather than go thru a foreclosure. Some lenders will work with the borrower giving them time to move out sometimes providing funds to help them move. 

This program has merits but, with the current job market many may find that it will buy them enough time to move on.  It is a work in progress and a viable option if you qualify.