HAMP Tier II Loan Modification

A few weeks back I wrote about the Home Affordable Modification Program, “H.A.M.P.”, which can help a homeowner modify their mortgage to an amount that that can be managed through interest rate and principal modification. But what happens if a homeowner does not qualify for the program or has a rental property? In that case, the new HAMP Tier II modification program may give homeowners new options that can help.

To be eligible for a HAMP Tier II modification, you must be a borrower who is not eligible for a regular loan modification, who failed a loan modification, or who applied for and was rejected for a loan modification. If a homeowner failed a permanent loan modification, twelve months must have passed from the effective date of the original permanent modification or the homeowner must have had a change in circumstances.

In addition, owners of rental property can apply for a HAMP Tier II modification for mortgages on their rental property, provided all of the following apply:

• You own fewer than six single-family rental units;
• You are in actual default on the rental mortgage;
• The net rental income on the property is less than the total mortgage payment on the rental property or the owners can document actual hardship;
• You intend to rent the property out (or have a family member occupy it rent free) for the next five years.

As a homeowner you must be careful about entering into Tier II modification, however, because once you accept the Tier II modification, you are no longer eligible for a HAMP Tier I modification which is the regular loan modification. As a result, homeowners should be extremely careful to make sure they consider and evaluate their eligibility for a HAMP Tier I modification because it generally gives borrowers better affordability protections. Also, if a homeowner defaults on a HAMP Tier II modification, they are not eligible for any HAMP modification.

The new HAMP Tier II loan modification is available on June 1, 2012. Applications must be submitted no later than December 31, 2013, with the permanent modification started no later than September 30, 2014. Be aware that the banks and mortgage companies do not have to tell you about this program so it is up to you, the borrower, to request the application.

Anthony J. Vignier, JD, CFP is an attorney and Certified Financial Planner in Kearny, New Jersey. He helps his clients with legal matters, asset and income protection strategies as well as investment guidance. Please call Anthony at (800) 707-5252 or send him a message through our contact form.