The largest program within MHA is the Home Affordable Modification Program (HAMP). HAMP’s goal is to offer homeowners who are at risk of foreclosure reduced monthly mortgage payments that are affordable and sustainable over the long-term.
HAMP was designed to help families who are struggling to remain in their homes and show:
- Documented financial hardship
- An ability to make their monthly mortgage payments after a modification.
HAMP is a voluntary program that supports servicers’ efforts to modify mortgages, while protecting taxpayers’ interests. To protect taxpayers, MHA housing initiatives have pay‐for‐success incentives. This means that funds are spent only when transactions are completed and only as long as those contracts remain in place. Therefore, funds will be disbursed over many years.
Starting in the summer of 2012, the scope of the program will expand to help even more families in need.
HAMP works by encouraging participating mortgage servicers to modify mortgages so struggling homeowners can have lower monthly payments and avoid foreclosure. It has specific eligibility requirements for homeowners and includes strict guidelines for servicers. The program includes incentives for homeowners, servicers, and investors to encourage successful mortgage modifications.
Families in this program typically reduce their monthly payments by a median of more than $530 each month. But the program’s impact goes even further. HAMP has also encouraged private lenders to modify mortgages at no expense to taxpayers.
When the housing crisis began, the mortgage industry was ill-equipped to respond adequately. Mortgage servicers had insufficient resources to address the needs of a market that was reeling from increasing foreclosures. In addition, their servicing expertise and infrastructure was limited to overseeing collections and foreclosing on those who failed to pay. They did not have the systems, staffing, operational capacity, or incentives to engage with homeowners on a large scale and offer meaningful relief from unaffordable mortgages.
Before HAMP, there was no standard approach among loan servicers or investors about how to help homeowners who wanted to keep making payments, but needed mortgage assistance.
By setting standards for what constitutes a sustainable modification across the mortgage industry, HAMP has helped to make private loan modifications more affordable for homeowners. In fact, thanks in part to HAMP, the proportion of private loan modifications that reduce monthly payments for homeowners has more than doubled. Together, public and private efforts have helped nearly 5 million Americans get mortgage assistance to prevent avoidable foreclosures.
MHA includes comprehensive compliance reviews to ensure that servicers fairly evaluate homeowners for assistance and follow program guidelines. Treasury requires participating servicers to take specific actions to improve their servicing processes to more effectively assist struggling homeowners. While more progress needs to be made, servicers are focusing attention on the areas identified through regular compliance and program reviews.
Note: If you are a homeowner seeking help with your mortgage, please visit Making Home Affordable.