Every week I receive several phone calls from homeowners who want to take advantage of the federal HAMP (Home Affordable Mortgage Program) but do not know where to start. Often these callers are behind two or three months and are receiving foreclosure notices, but they really do not want to file Chapter 13 before exhausting all non-bankruptcy alternatives.
These homeowners may have received foreclosure notices that suggest that the mortgage lender intends to negotiate or modify their mortgage. Georgia law now provides that all foreclosure notices must include a “negotiation provision.” O.C.G.A. Section 44-14-162.2 provides:
Notice of the initiation of proceedings to exercise a power of sale in a mortgage, security deed, or other lien contract shall be given to the debtor by the secured creditor no later than 30 days before the date of the proposed foreclosure. Such notice shall be in writing, shall include the name, address, and telephone number of the individual or entity who shall have full authority to negotiate, amend, and modify all terms of the mortgage with the debtor, and shall be sent by registered or certified mail or statutory overnight delivery, return receipt requested, to the property address or to such other address as the debtor may designate by written notice to the secured creditor.
However, in real life, very few of these homeowners have had much success in reaching a deal with their lenders.
What about the highly touted HAMP program? A quick search on the Internet reveals dozens of articles suggesting that, to date, HAMP is not working.
Now comes word that the federal government has modified HAMP to include homeowners in bankruptcy with new guidelines effective on June 1. Supplemental directive 10-02 specifically addresses the applicability of HAMP to homeowners in bankruptcy.
These directives are intended for mortgage servicers and set out numerous obligations for servicers. I did find a fairly comprehensive Making Home Affordable FAQ section written for borrowers on the MakingHomeAffordable.gov site.
In reviewing the HAMP materials, it appears to me that the program is designed to direct homeowners to approved HAMP counselors, rather than to have homeowners apply directly. Further there appear to be regulations that apply to mortgage servicers where they must proactively advise homeowners of possible eligibility. The on-going issue – the HAMP rules are so complex that most individuals will have no idea about whether they are eligible. For example, to qualify for a modification, here are the requirements set out in the FAQ:
- Be the owner-occupant of a one- to four-unit home.
- Have an unpaid principal balance that is equal to or less than:
- 1 Unit: $729,750
- 2 Units: $934,200
- 3 Units: $1,129,250
- 4 Units: $1,403,400
- Have a first lien mortgage that was originated on or before January 1, 2009.
- Have a monthly mortgage payment (including taxes, insurance, and home owners association dues) greater than 31% of your monthly gross (pre-tax) income.
- Have a mortgage payment that is not affordable due to a financial hardship that can be documented.
Would you know what documents to produce, or how to calculate 31% of your monthly gross income? The government goes on to advise you that “only your servicer will be able to tell you if you qualify.” In other words, you are expected to turn to the foreclosing lender to help you apply for a program that will stop foreclosure.
Thanks to Las Vegas bankruptcy attorney Randy Creighton for highlighting the June 1, 2010 HAMP changes on his well researched blog post.