Q: I think my mortgage holder is going to start a foreclosure on me again as they are not cashing my checks and have sent me numerous letters about the “HAMP” program which I heard nothing but bad things about.
What can you tell me about it? I am ready to lose it mentally since all I do is pay every cent I make to keep my house. I am on disability so my income is limited yet I still make my payments. I really need help before this gets out of hand more than it already has.
A: If we’re going to rebuild America, we’re all going to have to conquer some of our fears. You’ve been offered a lifeline in the Home Affordable Modification Program (HAMP) but you’re afraid to look into it. You won’t know if the program is right for you until you start to investigate it.
HAMP is a government sponsored plan that encourages lenders to modify the loans of people in trouble and, in particular, those homeowners that are in the road down to foreclosure.
The eligibility requirements for the program are that: (i) you obtained your mortgage on or before January 1, 2009; (ii) you owe up to $729,750 on your primary residence or single unit rental property; (iii) the property has not been condemned; (iv) you have a financial hardship and are either delinquent or in danger of falling behind on your mortgage payments (non-owner occupants must be delinquent in order to qualify); (v) you have sufficient, documented income to support a modified payment; and (vi) you must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.
Given your letter, we’ll assume you qualify under HAMP for a loan modification based on the eligibility requirement. However, just because you satisfy those requirements doesn’t mean that you actually will obtain a loan modification from your lender. Not all lenders will participate in the program and even those that do participate in the program, not all of the lenders have come through with flying colors to actually help their borrowers.
However, you are already down the path of foreclosure, if you want to save your home from foreclosure, the best option available to you at this time will be to attempt to get a loan modification through your lender. It appears that your lender participates in HAMP, as your lender has sent you several letters requesting that you apply for a loan modification.
The second part of your question is whether you should stay in your home and use most of your income towards your housing expenses.
You currently are on disability income and most of your income now goes towards keeping your home. The real question for us is whether you should remain in this home or if you should downsize your home. While we know you want to save the home, because the thought of leaving it and perhaps tarnishing your credit is scary, but that isn’t the right answer for everyone and you might be doing more long-term harm to your finances and your psyche.
It’s clear that you need a place to live, and that you love your home but even if you get a loan modification, you shouldn’t spend most of your income on paying your mortgage, taxes and insurance. If your disability is temporary and you expect your income to rise substantially to a point that you only pay about a third of your income or less towards your housing expenses, then you’d want to find a way to keep the home.
Otherwise, the best solution is the one that’s most difficult to hear: Let this home go. Sell it in a short sale (if your mortgage is worth less than the home value) or let it go to foreclosure and find something more affordable. Being less worried about whether you’ll have a roof over your head tomorrow will help you sleep far better tonight.