You applied for a HAMP modification, and you were turned down. But you're sure that you qualify. Can you apply for HAMP loan mod more than once?
It's important to know that if you are denied for a HAMP modification, your loan servicer has to inform you in writing why your application was denied. Keep in mind that the servicer only has to reveal the main or primary reason for denial; there may be additional reasons that your application was declined. If possible, speak to someone who can tell you if there are other factors involved in your denial.
Re-evaluate your application
If the reason you were unable to get a HAMP loan modification was that you failed to make your trial mortgage payments on time, you won't be allowed to reapply. But if that's not the case, and your situation has changed, and you believe that you may be eligible and qualified for HAMP now, you can reapply. Here are four circumstances that will allow you to reapply:
- If you were denied because your principal, interest, taxes, insurance and HOA dues did not exceed 31% of your gross income, but now they do, you can reapply.
- If you were denied because you had liquid assets sufficient to pay your housing expenses for more than three months, and now you don't, you can reapply.
- If you were told you didn't have enough income to make a modified payment, but now you do (e.g. you now have a roommate and a lease agreement) you may be able to try again.
- If you were denied because you were unemployed, you can now get assistance.
Loan modification rules are not straightforward
Keep in mind that even if you qualify for a loan mod according to HAMP guidelines, your lender may look at it differently. Loans not guaranteed by Fannie Mae or Freddie Mac will be modified (or not) according to the wishes of their investors. Loans are run through net present value (NPV) testing to see if the lender is better off in the long run modifying your loan, not modifying your loan or even foreclosing. The servicers don't all necessarily use the same NPV test. You may be able to request the variables used, like your income, assets, credit scores, property value, etc., and verify that they were correct. In general, the more underwater you are and the fewer concessions your lender has to make, the better your chances of getting a modification.
The basics of qualifying
In general, to qualify for a HAMP, you'll need to be living in the property with a loan that was originated before January 1, 2009, and a loan balance that does not exceed $729,750. Next, your income should be expected to continue for at least nine months. You also need a documented hardship: your mortgage payment must have increased (for example, you have an option ARM and your loan was recast), or your income decreased (you took an involuntary pay cut), or you've had a catastrophic illness. You must be able to document your hardship.
The Nitty Gritty Elements
Now, you need to see how much the lender will have to give up to get your payment down to HAMP guidelines. In general, the less your lender has to do, the more likely you are to get a loan modification. Take your gross (before tax) income, and multiple it by .31. For example, if you earn $5,000 a month, 31% of that is $1,550. Subtract the monthly property tax, hazard insurance and other expenses like flood insurance, HOA dues, etc. If those total $475, for example, your modified principal and interest would have to be lowered to $1,075. Next, see if it is possible to modify your payment to get this figure. Take your current balance and plug it into a mortgage amortization calculator. In this example, you could get your payment down to $1,075 by dropping the interest rate to 3.15% (rates can go no lower than 2%). You have a decent chance of getting a mortgage modification.
What the HAMP website doesn't tell you
If you're not upside down on your home (if your lender could foreclose, sell the property and get all of its money back), chances are you won't get a loan mod. You'd fail the NPV test, the lender would conclude that it's better off not modifying your loan, and it would foreclose if necessary. How do you know what property value the lender uses? You ask. Check estimates online; there are many sites to choose from. You'll get a lot of different figures, but it should give you some idea of where your property value is in relation to your mortgage balance.
The proof and the paperwork
If you decide to give HAMP another shot, you can probably pull the required forms from your lender's website. Or you can get a basic HAMP application package from www.hmpadmin.com. Call your lender to inform the loss mitigation department that you will be re-applying for HAMP. If someone tells you that you can't (this happens a lot), refer that person to Supplemental Directive 10-01, which states:
A borrower who has been evaluated for HAMP but does not meet the minimum eligibility criteria described in the "HAMP Eligibility" section of Supplemental Directive 09-01 or who meets the minimum eligibility criteria but is not qualified for HAMP by virtue of a negative NPV result, excessive forbearance or other financial reason, may request reconsideration for HAMP at a future time if they experience a change in circumstance.
Fax your completed new application, including an updated hardship affidavit and letter, call to make sure it's been received, to get the process going once again. Continue to make your modified payment (the same one you made during your trial period), and check back weekly for status updates.
Gina Pogol has been writing about mortgage and finance since 1994. In addition to a decade in mortgage lending, she has worked as a business credit systems consultant for Experian and as an accountant for Deloitte.