The Home Affordable Modification Program
In March 2009, the Obama administration introduced a program called the Making Home Affordable (MHA) program. Within the MHA program is the Home Affordable Modification Program (HAMP), which allows homeowners to seek modification of their mortgage(s) where the homeowner is not able to afford the current mortgage terms. In order to qualify for HAMP, a borrower must (1) be delinquent on their mortgage or be in imminent danger of default; (2) the property in question must be occupied and be the borrower’s primary residence; (3) the mortgage in question must have originated on or before January 1, 2009; and (4) the outstanding balance on the mortgage cannot exceed $729,750 for single unit properties.
Under HAMP, the borrower’s mortgage is adjusted to 31 percent of the borrower’s pretax monthly income. This is achieved by first lowering the mortgage interest rate to a rate as low as 2 percent. If the rate adjustment alone does not reduce the mortgage payment to 31 percent of the borrower’s pretax monthly income, HAMP allows the term of the mortgage to be extended up to a 40 year mortgage to further reduce the monthly payment requirement. If the 31 percent pretax monthly income level is not achieved with these two steps, HAMP allows for the deferring a portion of the principal of the mortgage until after the mortgage is paid off (which may also include waiving interest payments on the deferred portion).
Mortgage Modification in a Southern District of Florida Bankruptcy
For an individual who has financial problems that may extend beyond a delinquent mortgage, a bankruptcy filing may be a more appropriate venue for achieving financial stability. In the Southern Florida federal court district (which includes Broward, Dade, Highlands, Indian River, Martin, Monroe, Okeechobee, Palm Beach and St. Lucie), individuals who file for relief under Chapter 7 (liquidation or straight bankruptcy), Chapter 13 (individual reorganization), Chapter 11 (large debt reorganization), or Chapter 12 (family farmer reorganization) can apply for mortgage modification under a fairly new program called Loss Mitigation Mediation (LMM).
LMM is designed to get to get to the bottom line of whether there is a workable modification to the mortgage that the individual can afford. Mortgage modification essentially amounts to a refinancing of sorts, but it is a streamlined process designed to allow the individual (and his or her attorney) to communicate with one designated individual who can make decisions on behalf of the lender. LMM is specifically designed so that the individual does not get deceived by the lender (bank), where the individual is told one thing by one of lender’s employees and told another thing by another employee.
The Southern District’s LMM process provides a confidential online portal where all relevant mortgage documents are uploaded to a secure site. The individual, usually through the use of a bankruptcy attorney, works out a mortgage repayment solution. Under the Southern District’s LMM program, several solutions (technically called “remedies”) are available to cure a delinquent mortgage. These solutions include:
· a HAMP or government sponsored loan modification (Chapter 11, 12, or 13 only);
· a conventional loan modification (Chapter 11, 12, or 13 only);
· a deed in lieu of foreclosure (Chapter 7 or 13 only);
· a state court consent in rem final judgment of foreclosure (Chapter 7 or 13 only);
· surrender incentives (Chapter 7 or 13 only); or
· some other proposed solution.
Assuming the individual and the lender agree to participate in the LMM, the bankruptcy court will order both sides to negotiate in good faith, which means trying to come to a reasonable and workable solution. The mediation process must be completed in no more than 150 days from the time the bankruptcy court orders the mediation, unless both sides agree to an extension of time. The negotiation process is directed by a neutral, court-appointed mediator, who helps the individual and the lender to discuss possible ways to modify the mortgage, either allowing the individual a way to avoid foreclosure or negotiate acceptable surrender terms.
Dealing with mortgage modifications and lender bureaucracy can be very difficult and time consuming. If you are facing foreclosure and or bankruptcy and you need help today, please contact the Law Offices of Kelley & Fulton, P.A.