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The government Making Home Affordable program, which is known as HARP, has two different ways of helping home owners with mortgages. Under the program you can either refinance or modify your mortgage.

In order to refinance you must have a mortgage that is either owned or guaranteed by Fannie Mae or Freddie Mac. You must have paid your mortgage on time over the past year. And, the amount you owe on your first mortgage must be no more than 125% of the value of your home. In addition, you must be able to afford the payments of the refinanced mortgage. If you have a second loan, that lender would need to agree to your refinancing the first mortgage. The refinance would not change the terms of the second mortgage. Note that at this time the refinancing program is scheduled to expire on June 10th 2010.

If you do not qualify for refinancing you may qualify for a modification of your mortgage. The modification program is called Home Affordable Modification or HAMP. The goal of AHMP is to reduce your mortgage payments so that you can afford the payments. Although non-Fannie Mae and Freddie Mac loans are eligible under this program, lenders are not required to modify all loans. If your lender is a program participant, if you have a second mortgage, it would automatically be eligible for a modification when your first mortgage is modified under HAMP.

In order to qualify for a modification you must meet the following criteria:

  • Own and live in a 1 to 4 family house.
  • The unpaid balances on the mortgages can’t exceed the following amounts:
    • 1 family $729,750
    • 2 family $934,200
    • 3 family $1,129,250
    • 4 family $1,403,400
  • The mortgage must have been entered into before January 1, 2009.
  • The mortgage payments, including taxes, insurance and home owners’ association dues, must be greater than 31 percent of your monthly gross income.
  • The mortgage is not affordable due to a financial hardship.

If your lender agrees to modify the loan, there will be a trial period typically of 3 months at the reduced mortgage payment amount. At the end of the trial period, if you have made your payments on time and your documentation is accurate, your lender will permanently modify your mortgage. The modification program is scheduled to expire on December 31, 2012.

For the latest information on these programs check with the official government website www.makinghomeaffordable.gov

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