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In-House Vs. HAMP Loan Modifications: Which Is Better?

So what do you do if you need a loan modification? Is it better to pursue an in-house traditional loan modification or one offered under the Home Affordable Modification Program (HAMP)?

Since lenders typically don't have to observe HAMP loan modification guidelines, their mods may offer more flexibility. The lender may set the terms of the loan and ultimately decide whether or not to grant a modification. It's this simple.

Some of the benefits of in-house modifications over the HAMP program are as follows:

  • A traditional or in-house modification may utilize fixed interest rates. While most HAMP modifications have interest rates that progressively increase over 5 years, in-house modifications may have a low fixed interest rate for the mortgage's entire term.
  • The lender may implement less strict guidelines for granting loan modifications. Whereas certain facts such as the mortgage balance and date of the loan's creation may disqualify homeowners under HAMP, these same facts won't disqualify homeowners from a traditional modification.
  • A traditional in-house modification is certainly more expedient in most situations than a HAMP modification. A bank may approve an application for an in-house much more quickly than HAMP. Also, while HAMP requires a three month trial modification period, private lenders modifying loans may permanently modify a loan with just a couple of trial payments, or no payments at all.

Some of the benefits of HAMP are:

  • The program allows for more affordable payment by adjusting the interest rate, extending the loan term, and reducing or forbearing the principal.
  • HAMP homeowners typically save about $500 per month.
  • HAMP allows assistance for a homeowner's primary residence or rental property. If you have a vacation home that is subject to foreclosure, HAMP is not an option.
  • If a homeowner is significantly underwater on the home, i.e., owes more than the home is worth (>115% Loan-To-Value), the loan is automatically evaluated for a reduction in principal.
  • Making timely payments under HAMP allows a homeowner to potentially earn up to $10,000, which would be available to reduce the balance of the mortgage principal.

Ultimately, the lender may do as it pleases regarding the modification of a loan. However, it would prefer finding a solution that allows the mortgage to be repaid rather than foreclosed. At least in most instances.

Many homeowners who apply for a loan modification without the assistance of a professional are denied. At Loan Lawyers, our South Florida consumer rights and debt defense attorneys can help individuals fighting the foreclosure of their home. We can help determine any options regarding loan modifications and loss mitigation. For a no-risk, no-cost consultation, contact one of our South Florida consumer defense attorneys today by calling (888) FIGHT-13 (344-4813).