HAMP Loan Program: The Other Shoe Is About to Drop
First, the good news: Many struggling homeowners avoided losing their homes through foreclosure by working with their lenders to lower their monthly mortgage payments. Their “savior” was often the Home Affordable Modification Program, or HAMP.
The bad news: Monthly house payments will soon go up for nearly 30,000 homeowners who modified their mortgages in 2009 through HAMP. Next year, more than 290,000 homeowners will see their rates reset, and most will actually pay more for their mortgages. What’s more, homeowners are being kicked while they’re down: They could expect to see their credit scores drop, their credit card limits fall and their credit card interest rates shoot up. Even those with 720 FICOs and no history of late payments could see a substantial drop in their credit score.
Many homeowners were warned that HAMP would offer only temporary help — that these “permanent” loan modifications would last for five years and no longer. But, human nature being what it is, some homeowners adjusted their budgets to the newly lowered monthly mortgage payments they were making. They neglected to consider that the expiration of their five-year period could also mean that their rate might jump a full percentage point annually, topping off at the average market rate at the time their loan modification was made — anywhere from 3.5 percent in 2013 to 5 percent in 2009.
Helping HAMP borrowers
Homeowners faced with ballooning house payments they can’t afford should waste no time contacting their lender. Waiting for their lender to contact them could strain the lender-borrower relationship. As for lenders, loan servicers can work with borrowers to review their finances and be prepared to offer workable options or “rescue” programs the borrower may qualify for. A more complete picture of a borrower’s credit profile and repayment history can help lenders determine the best course of action.
Income verification tools
Powerful income verification tools like those provided by Equifax leverage vast databases, like The Work Number® database of more than 58 million active employment records from over 3,700 employers across the United States. Lenders have quick access to both basic employment information and compensation data, including wages, bonuses, commissions, overtime, salary history and pay increase details (if available). Payroll data comes directly from employers and is updated every payroll cycle. Lenders benefit from employment data they can act on — delivered in seconds, not hours or days.
Collateral valuation tools
Equally powerful collateral valuation tools can side-step time-consuming and costly valuation comparisons from various vendors to determine the most accurate data for a given property or area. Equifax’s Collateral Value Connector™ organizes the industry’s leading AVMs in a cascade arrangement, allowing lenders and servicers to optimize their automated collateral valuation strategy, streamline workflows and ensure lenders meet federal compliance guidelines.
If your borrowers are being hammered by HAMP, powerful income verification and collateral valuation tools can help you help them.
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