How to Qualify for a Loan Modification-HAMP

President Obama passed the HAMP, Home Affordable Mortgage Program, to help homeowners to lower their mortgage payment. This program was implemented to keep homeowners in their home at an affordable mortgage payment for people who wanted to stay in their homes.  Every homeowner should contact their lender to apply for a reduction in their mortgage payment. The frustration started when homeowners were denied their loan modification. Some homeowners were denied several times for a loan modification. As homeowners began to fear losing their home because the homeowner lost their income, it made a simple program harder for people to qualify.

Reasons for Denial

A homeowner may be denied the loan modification under the HAMP, Home Affordable Mortgage Program, because the way the paperwork was submitted. If the homeowner didn't complete their financial paperwork correctly, the lender may deny the loan.

 The reasons loan modification are denied as follows:

                                                   1.  Homeowner doesn't make enough money
                                                   2.  Monthly payment 31% or less of the gross monthly income
                                                   3.  Debt coverage ratio exceed 1.20
                                                   4.  Not Owner-occupied
                                                   5.  Missing documents in the submitted package
                                                   6.  Current unpaid principal balance exceed $729,750
                      

Do not move out of your home -The home must be Owner-Occupied

The homeowner will be disqualified for the loan modification

Qualify for Hardship

The lender requirement is to write a hardship letter to explain the need for a reduction in the mortgage payment. A hardship letter should be only one page long explaining to the lender the request for a payment reduction. All homeowners are required to sign an Affidavit of Hardship.  The hardship letter must include these circumstances as follows:
           1. Loss of Income Or Unemployment
           2. Decline In Self-Employment Business
           2. Reduce Hours On The Job
           3. Unexpected Medical Expenses-Chronic Illness, Disability, Taking Care of Elderly Relatives
           4. Lack of Cash Reserve-not greater than $5,000 or three month of house payments
           5. Natural Disaster - Unexpect High Property Tax
          
A debt coverage ratio is less than 1.20 of the annual net income and annual debt expenses.  The calculation is based on the annual net income divide by the annual expenses. If the debt coverage ratio is higher than 1.20, the homeowner may not qualify for the loan modification. The disposable income is the same term as net income when the negotiator tell the homeowner that they do not have enough of disposable income.

Approval 

The lender reviews all the financial documents submitted by the homeowner and decides to approve or deny the request for the loan modification.  The homeowner that is approved receives a reduction in their interest rate and may receive a deferment or forgiven on their back payments. The lenders are not obligated to defer the back payment or to forgive the back payment. The forgiveness on late payments is based on the negative equity in the home only. Homeowner must be persistence in contacting the lender weekly to receive an approval.

Don't take a no for an answer from the lender. Ask the negotiator how did you arrived at that decision. Request the lender to send you the paperwork on why the loan modification was denied. If you don't understand, keep asking the negotiator to explain it. Make sure you understand the debt to ratio before you turn in a car. Request in writing from the lender when you turn in a vehicle, voluntary repossession, that you will receive an approval for the loan modification. You have the rights to fight for the loan modification approval. If you are denied, you may re-submit the paperwork again.

Increase Credit Score

Late payments on a mortgage may affect the homeowner's credit scores during a hardship circumstances. After the homeowner receives an approval for the loan modification, it is time to start rebuilding the credit. The booklet, "Increase Your Credit Score After Short Sale, Foreclosure and Bankruptcy", provides the techniques to increase a homeowner's credit scores after a loan modification. The program offers “FREE 30 DAYS COACHING” as well as the booklet at increaseyourcreditscorenow.com
 
We provide monthly newsletters on how to increase an applicant's credit scores and weekly blogging information at increaseyourcreditscorenow.blogspot.com
               

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