During the mid 2000s, home buying was at an all-time high, and many people who thought they would never qualify for a home loan were suddenly getting one. It finally seemed like everyone had the chance of getting in on the American Dream.
Then the housing bubble burst and the crash came. Many of those borrowers who were so happy to have qualified for a home loan just a couple of years ago were now struggling to make their payments. In order to help people save their homes, the government, in conjunction with the individual mortgage companies, started the Home Affordable Modification Program, better known as HAMP. The mortgage companies, under the guidance of the federal government, evaluate borrowers’ financial situations to see if they qualify for a reduction in interest rate, monthly payment, or a longer repayment period, among other remedies. The program sounded like it would be the answer to many homeowners’ nightmares.
Four years have now elapsed since HAMP was started. Was the program successful? How many people were helped? Are those that received help still happy homeowners today? Unfortunately, the answers to these questions are not as encouraging as you might hope.
HAMP has produced 1.2 million mortgage modifications. That may seem like a lot, but it isn’t when you consider that only about 15% of the people who asked for a modification actually got one. Some people were told that they did not meet the HAMP requirements and did not qualify for a loan modification. Others struggled for months to get the required financial documents to the mortgage company, being told time after time the documents were not received, before getting frustrated and giving up. The government acknowledges receiving thousands of complaints about the difficult time homeowners had trying to work with their mortgage companies.
I’d like to tell you that life for the 15% that did get modifications is pretty good. However, there are some very troubling statistics about the people who were approved for HAMP loan modifications. Of the people who received loan modifications in 2009, 46% have once again fallen behind in their mortgage payments. Of the people who received loan modifications in 2010, 38% have since fallen behind on mortgage payments again.
HAMP modifications were designed to lower mortgage payments to 31% of gross household income or less. Let’s do a little math. In 2011, the average household income in the United States was approximately $50,000.00 per year and the average household had about three people in it. If this average household had applied for and been given a HAMP modification, their mortgage payment would be approximately $1,300 per month. After taxes and the mortgage payment, that only leaves $2,160 per month for food, car payments, car insurance, health care, utilities, child care, debt repayment, etc. Based on the average monthly expenses I see from my clients, a $1,300 per month mortgage payment is not affordable for our average family and would leave them at least a few hundred dollars in the red every month. And that is assuming they have no daycare expense, no car payments, no credit cards or personal loan payments and no major medical problems. Government officials now admit that lowering mortgage payments to 31% of gross income may not have been enough help for homeowners considering the other bills they have to pay.
The HAMP program is authorized to continue for at least another two years. In the next two years, millions of homeowners, desperate to save their homes, will turn to their mortgage company and HAMP for help. Unfortunately, the numbers don’t show that they have much reason to hope. If you find yourself behind on your mortgage payments or think that you are on the brink of falling behind, give Steidl & Steinberg a call at 800-360-9392. We have helped thousands of people keep their homes by helping them get caught up on missed mortgage payments and getting rid of other debt, like credit cards, which cost you money that should be going to help you keep your home. At Steidl & Steinberg, our attorneys will give you an alternative to relying on HAMP and your mortgage company for help.