HAMP Loan Mod Program Revised, Offers More Principal Reduction, Lower Interest Rates
The government recently announced two important revisions to HAMP that are hoped to provide more and better loan modifications.
HAMP loan modifications will now have increased principal reductions. In the sixth year of a loan modification, homeowners will now be given an extra $5,000 principal reduction, increasing the total principal reduction possible under HAMP to $10,000. Studies have shown that principal reductions make mortgage payments more affordable and reduce the risk of redefault.
Loan modifications under another modification program, HAMP Tier 2, will have reduced interest rates. The standard interest rate provided with a loan modification will now be decreased by 0.5%.
The U.S. Department of the Treasury and the Federal Housing Finance Agency have been criticized for not providing significant principal reductions in connection with loan modifications. These changes to HAMP, although not drastic, are an important step toward helping many people, including homeowners in Massachusetts, to save their homes.
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