Home Affordable Modification Program & Home Affordable Foreclosure Alternatives

The Obama government has stepped in once again to aid home owners burdened with mortgages that they can not afford. According to recent studies, almost a quarter of all US mortgage holders are overextended on the loan with dues exceeding the actual recoverable value of their home.

The Home Affordable Modification Program (or HAMP) will soon be taking on a new avatar from the beginning of April this year. Some new provisions called the Home Affordable Foreclosure Alternatives (HAFA) have been added to the existing HAMP, which will seek to bailout home owners whose loan exceeds the current value of their property.

The HAFA will make it attractive for lenders to accept less than full repayment of their loans from home owners who are forced to sell their property for less than the loan value. Homeowners will also have the option to deed the property to the bank in lieu of the foreclosure option.

However, Treasury Department sources say that these measures will not do much for homeowners’ mortgage woes. They will merely offer alternatives to loan modification. The short sales and repayment will especially be unpopular, they believe. This option will be open to homeowners who lacked the income qualification for HAMP loan modification, or who defaulted on two modified loan installments continuously. A third scenario of eligibility is when the homeowner has taken up a trial HAMP loan modification.

Short sale means that the property would be sold less for than the total mortgage value. An independent appraisal will set a minimum sale price for the house and this may not even be known to the homeowner. In case the homeowner opts for Deed in Lieu of Foreclosure, the lender will get the ownership of the home without any debts or charges against it.

The HAFA offers cash incentives for the homeowner ($1,500), and the primary and secondary mortgage lenders ($1000). These are expected to make the HAMP more popular among home owners who have huge mortgage payables on their heads. Process cost wise, the HAFA will make mortgage paybacks cheaper and less cumbersome for the financial institutions. On the other hand, for the homeowner, his or her credit score will look a little better with a short sale as opposed to a foreclosure on his credit history.

Homeowners, if they can afford have other options too. For instance, they could refinance loan or opt for a HAMP loan modification, which is likely to come at good interest rates these days. Even unemployed persons can avail these options provided they can draw unemployment insurance for the next nine months. Homeowners can also opt for principal reduction options like the one offered by Ocwen Financial.