Hardship Requirements Of Obama’s Making Home Affordable Program (HAMP)

A few weeks ago, we started our HAMP coverage with the perplexing Net Present Value Test – an element of HAMP borrower eligibility.  Note that with HAMP we have (1) borrower eligibility, (2) mortgage eligibility, and (3) property eligibility.  Today, we’re dissecting the hardship requirement, which is another component of HAMP borrower eligibility.

As you probably know already, a borrower must be able to show a hardship in order to qualify for a modification.  Here is a non-exhaustive list of events that constitute a presumption of hardship[1]:

  1. A reduction in or loss of income (reduced job hours, reduced pay, decline in self-employed business earning, or unemployment),
  2. A change in household financial circumstances (death in family, serious or chronic illness, permanent or short-term disability, or increased family responsibilities),
  3. A recent or upcoming increase in the monthly mortgage payment,
  4. An increase in other expenses (medical/health-care costs, uninsured losses, or increased real property taxes),
  5. A lack of sufficient cash reserves to maintain payment on the mortgage loan and cover basic living expenses at the same time[2], and/or
  6. Excessive monthly debt payments and overextension with creditors.

The loan modification candidate should be prepared to provide sufficient documentation for one or more of the above hardship scenarios.

Acceptable documentation for the death of a borrower/co-borrower includes:

  1. Death certificate or obituary or newspaper article reporting death AND
  2. Income documentation prior to the death compared to income documentation after the death.

Acceptable documentation for a long-term or permanent illness of disability of a borrower/co-borrower or a dependent[3]of the borrower/co-borrower includes:

  1. Medical bills,
  2. Doctor’s certificate of illness or disability,
  3. Proof of monthly insurance benefits of government assistance (if applicable), or
  4. Federal income tax return showing that medical deductions are greater than the minimum amount for itemized deductions.

Acceptable documentation for a divorce or legally-documented separation of the borrower/co-borrower includes:

  1. A divorce decree signed by the court,
  2. A current credit report evidencing recorded divorce decree,
  3. A separation agreement signed by the court if separation is legally documented by the court,
  4. A current credit report evidencing a recorded separation agreement,
  5. When borrowers are unmarried, a recorded quitclaim deed indicating that the borrower relinquishes all rights to the property securing the mortgage loan, or
  6. Income or expense documentation prior to the event compared to the income or expense documentation of the remaining borrower after the event.

According to the Treasury Dept., HAMP does not distinguish between short-term and long-term hardship for eligibility purposes but the borrower’s hardship must be causing the inability to make current mortgage payments.  However, it is suggested to err on the side of showing a long-term type hardship.

[1] A full list of hardships from the Treasury Dept. website include: 1 – Death of borrower, 2 – Illness of principal borrower, 3 – Illness of borrower family member, 4 – Death of borrower family member, 5 – Marital difficulties, 6 – Curtailment of income, 7 – Excessive obligation, 8 – Abandonment of property, 9 – Distant employment transfer, 10 – Property problem, 11 – Inability to sell property, 12 – Inability to rent property, 13 – Military service, 14 – Other, 15 – Unemployment, 16 – Business failure, 17 – Casualty Loss, 18 – Energy environment costs, 19 – Servicing problems, 20 – Payment adjustment, 21 – Payment dispute, 22 – Transfer of ownership pending, 23 – Fraud, or 24 – Incarceration.

2 Cash reserves include cash, savings, money market funds, stock and bonds.  Cash reserves do not include retirement accounts or other assets reserved as emergency funds.

3 As defined under Federal Income Tax purposes.


[1] A full list of hardships from the Treasury Dept. website include: 1 – Death of borrower, 2 – Illness of principal borrower, 3 – Illness of borrower family member, 4 – Death of borrower family member, 5 – Marital difficulties, 6 – Curtailment of income, 7 – Excessive obligation, 8 – Abandonment of property, 9 – Distant employment transfer, 10 – Property problem, 11 – Inability to sell property, 12 – Inability to rent property, 13 – Military service, 14 – Other, 15 – Unemployment, 16 – Business failure, 17 – Casualty Loss, 18 – Energy environment costs, 19 – Servicing problems, 20 – Payment adjustment, 21 – Payment dispute, 22 – Transfer of ownership pending, 23 – Fraud, or 24 – Incarceration.

[2] Cash reserves include cash, savings, money market funds, stock and bonds.  Cash reserves do not include retirement accounts or other assets reserved as emergency funds.

[3] As defined under Federal Income Tax purposes.

 

(This article is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer. If you have any questions about this Article, please call or e-mail Stephen Vokshori, Esq. (213.986.4323 / stephen@voklaw.com) or any other member of Vokshori Law Group.)

Comments
3 Responses to “Hardship Requirements Of Obama’s Making Home Affordable Program (HAMP)”
  1. I had my primary residence under a friend’s name and mine, in a joint tenancy with right of survivorship in Hollywood, Florida.

    The residence has a loan under my friend’s name with Bank of America. The second loan only under my name with Bank of America. We did a ‘Quit claim deed’ and recorded it in court. My friend suffered a stroke and was relocated to Maine, where his daughter resides.

    Since the loan originated in 2006, I have paid for the loan, it is my primary residence. My friend never resided at the residence.

    Due to my reduction of my income, the loan goes into foreclosure. For the past two years I have tried to modify the loan, but Bank of America has always denied it. I have presented my income and expenses. Initially they say they will consider it using only my income, but at the end, they end up denying it.

    I was told by Jim Anderson, Advocate from the offices of the CEO of Bank of America, that the ‘Quit Claim Deed’ is sufficient to be considered for the HAMP program. With my luck, Jim Anderson, retired from Bank of America.

    Any suggestions you think I should do?

    Thanks,

    Elizabeth Sanchez
    1020 Lincoln Street
    Hollywood, FL 33019
    (954) 922-6332

  2. I had my primary residence under a friend’s name and mine, in a joint tenancy with right of survivorship in Hollywood, Florida.

    The residence has a loan under my friend’s name with Bank of America. The second loan only under my name with Bank of America. We did a ‘Quit claim deed’ and recorded it in court. My friend suffered a stroke and was relocated to Maine, where his daughter resides.

    Since the loan originated in 2006, I have paid for the loan, it is my primary residence. My friend never resided at the residence.

    Due to my reduction of my income, the loan goes into foreclosure. For the past two years I have tried to modify the loan, but Bank of America has always denied it. I have presented my income and expenses. Initially they say they will consider it using only my income, but at the end, they end up denying it.

    I was told by Jim Anderson, Advocate from the offices of the CEO of Bank of America, that the ‘Quit Claim Deed’ is sufficient to be considered for the HAMP program. With my luck, Jim Anderson, retired from Bank of America.

    Any suggestions you think I should do?

    Thanks,

    Elizabeth

  3. dermeza mohammed says:

    i lost my job two years ago still unemployed and lossing my home have five kids

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