Secrets to HAMP Loan Modification Guidelines

The secret to understanding the loan modification guidelines for HAMP completely rests in how you submit your income and expenses. A few bucks in either direction on your groceries or electric bill could mean the difference between cutting your mortgage payment in half, and being outright denied. I have gathered a few of the most important secrets to follow when trying to navigate the HAMP loan modification approval process.

HAMP Income to Debt Ratio Guidelines – The magic number to understand here is 31%. Under HAMP guidelines the lender is supposed to reduce your mortgage payments to 31% of your gross income . If your income to debt ratio is below 31% and nothing can be adjusted, HAMP will not be an option worth spending long periods of time trying to qualify for. If you come in anywhere between 32% – 70% it will be worth exploring HAMP further and requesting a review.

Excess Monthly Cashflow Guidelines – This number is the simple calculation of monthly income minus monthly expenses. The result will be either a surplus or deficit. The general rule with most lenders is not to let either a surplus or deficit exceed 10% of the total gross monthly income. Easier said, make sure that your excess monthly cashflow shows that you can afford a mortgage payment of 31% of the gross income. They can't lower you payments to something unless you can show the ability to pay that much.

NPV Test (Net Present Value) – This test is basically used to determine how a HAMP loan modification effects the lenders bottom line. It calculates many factors including the value of the home, your re-default rate, and many others to determine whether it's worth accepting government cash and establishing a HAMP loan modification on your loan. If a loan fails the NPV test, the lender may automatically consider it for other in-house and investor modification options. Many times a couple minor adjustments to the income or expenses can result in passing the NPV test after failing previously.

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There are many guidelines that determine whether or not your loan qualifies for a HAMP loan modification. The good news is that you can usually make adjustments or changes to your monthly budget in order to present a better case for the lender to modify your loan. It can take a bit of patience and persistence but the end result can be the piece of mind that you will be in your home for a long time to come.