Posted in: Foreclosures and short sales

Loan modification and foreclosure alternatives

Loan modification and foreclosure alternatives
Key takeaways:
  • Homeowners unable to pay their monthly mortgage payments may be eligible for assistance that helps them avoid foreclosure
  • HAMP helps homeowners lower their monthly mortgage payments so they can avoid foreclosure or short sale and better afford their loan over the long-term
  • HAFA helps homeowners exit their homes responsibly, while avoiding foreclosure

If you’re a homeowner who is stressed and struggling to fulfill your monthly mortgage payments, there are programs that can help you avoid foreclosure. Here are insights on the Home Affordable Modification Program (HAMP) and Home Affordable Foreclosures Alternative Program (HAFA).

What is HAMP?

HAMP is a government program designed to lower the monthly mortgage payments of homeowners who are suffering from financial hardship. The goal of the program is for homeowners to remain in their homes, even if they’re currently struggling to make their mortgage payments.

Here are the main benefits of HAMP:

  • Homeowners may receive a reduction in their loan’s interest rate or have their loan’s term extended to reduce payments. In some cases, their loan’s principal may be reduced
  • HAMP homeowners typically see a savings of $500 per month
  • Participants who make on-time payments may earn up to $10,000 to be used towards reducing their principal

What is HAFA?

HAFA provides another option for homeowners who are unable to keep their homes through the HAMP program. The goal of HAFA is for homeowners to avoid foreclosure, either by taking part in a short sale or a deed-in-lieu of foreclosure (DIL).

Short sales
The seller asks their lender(s) to agree to take less than the amount owed on the home.  It’s considered a short sale when the sale price is insufficient to pay off the total mortgage(s) and costs of the sale. Learn more about selling your home as a short sale.

Deed-in-Lieu of Foreclosure (DIL)
Generally, if the borrower makes a good faith effort to sell the property but is not successful, a lender may consider a deed-in-lieu of foreclosure in which the borrower voluntarily transfers ownership of the property to the lender. A DIL typically provides the homeowner more generous terms, and is less harmful to their credit, than a foreclosure.

The benefits of HAFA are:

  • Once complete, the homeowner is entirely released from their mortgage debt
  • Participants are eligible for $10,000 in relocation assistance
  • Participating in HAFA may affect your credit less than a foreclosure

HAMP and HAFA eligibility

Most large banks and lenders participate in HAMP and HAFA programs, including Wells Fargo, CitiMortgage and Bank of America. Check here to see if your bank participates.

General requirements for HAMP and HAFA include:

  • A mortgage that began on or after January 1, 2009
  • Homeowners who can demonstrate financial hardship that makes it hard to pay their mortgage payments
  • Homeowners who are delinquent on payments or in danger of becoming delinquent

Get on a better path

Homeowners who are struggling to pay their mortgages can visit the government’s Making Home Affordable site for more information on eligibility, or call 888-995-HOPE (4673). 

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Status Definitions

For sale: Properties which are available for showings and purchase

Active contingent: Properties which are available for showing but are under contract with another buyer

Pending: Properties which are under contract with a buyer and are no longer available for showings

Sold: Properties on which the sale has closed.

Coming soon: Properties which will be on the market soon and are not available for showings.

Contingent and Pending statuses may not be available for all listings