HAMP: What You Need to Know Before the End of 2016

Managing Your Mortgage, Mortgages
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If you’re struggling to make your monthly mortgage payment, losing your home can become an all-encompassing fear. But, there are two lifelines available through the federal government: the Home Affordable Modification Program, or HAMP, and the Home Affordable Refinance Program, also called a HARP loan.

The HAMP program expires Dec. 30, 2016, so check out its detailed guidelines and requirements to apply by the end of this month.

» MORE: 5 tips for finding the best mortgage lenders

What is HAMP?

An unexpected event — such as a job loss, serious illness or disability, or the death of a loved one — could make you quickly fall behind on mortgage payments.

HAMP helps with modifying your existing loan by extending its term, adjusting your mortgage rate, and reducing or temporarily deferring your principal payments, according to the Treasury Department and the Department of Housing and Urban Development, the agencies that administer HAMP.

Although HAMP expires this year, Fannie Mae and Freddie Mac have announced a new foreclosure prevention program for 2017: the Flex Modification program. It leverages some parts of HAMP to help struggling homeowners avoid foreclosure by providing a 20% payment reduction for eligible borrowers, according to a Fannie Mae release.

Advantages of a HAMP loan

With a reduction of the principal balance and an extension of your loan term, HAMP can save you roughly $500 per month, according to recent data.

You can earn up to $10,000 for making timely payments, which can be used to reduce the principal. Also, you can use HAMP for your primary residence or a rental property of one to four units.

HAMP eligibility

To qualify for HAMP, your loan must be owned by Fannie Mae or Freddie Mac (if you’re unsure about this, contact your lender). Also, you will need to get your financial documentation in order and be prepared to show proof of a financial hardship as well as income and other personal data.

Here’s a rundown of HAMP requirements:

  • You took out your loan in the thick of the housing crisis or before. HAMP is meant to help borrowers who owe considerably more on their loan than their home is worth. If you obtained your mortgage on or before Jan. 1, 2009, you qualify for a HAMP loan modification. If you took out your loan after that date, check if your mortgage lender will work with you on modifying your loan directly, or look into whether you qualify for the HARP refinance loan.
  • You’ve fallen on hard financial times. HAMP is meant to help homeowners who are delinquent on their mortgage or in serious danger of falling behind due to a documentable financial hardship. This could be a job loss, death in the family, unemployment, reduction of work hours, or other unexpected situations.
  • You owe no more than $729,750 on your mortgage. In other words, if you have a home loan above that amount, you’ll need to find another option if you can’t meet your mortgage obligations. Check with your lender to see what options you might have, or if you can do a traditional refinance. Keep in mind, though, it could be difficult qualifying for a standard refinance if you’ve fallen behind on mortgage payments or you no longer have verifiable proof of income.
  • Your property hasn’t been condemned. Local, state or federal governments can seize your property for public use under the power of eminent domain. But the law, in most cases, requires a governmental entity to offer you just compensation in a condemnation proceeding. You would have been notified in writing if your property is condemned, so see if you received such a notice before applying for HAMP.

How to get help

Applying for the HAMP program will require careful documentation of your hardship and your finances, but you don’t have to navigate the process alone. Experts from a HUD-approved housing counseling agency in your area can walk you through your HAMP application. Or call 888-995-4673 for 24/7 guidance.

» MORE: Your one-stop-shop for managing your home

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Deborah Kearns is a staff writer at NerdWallet, a personal finance website. Email: dkearns@nerdwallet.com. Twitter: @debbie_kearns.