Loan Modification Programs Explained

Loan modification programs are daunting.

Being a homeowner comes with big responsibilities, the most obvious being your monthly mortgage payment. Whether you’ve hit a financial roadblock and can’t afford your entire payment or have suffered from declining home prices and find your mortgage underwater mortgage, there are solutions available. Usually, the best course of action is to talk to your lender as soon as you start experiencing financial difficulty — they might be willing to work out a loan modification specifically tailored to your personal situation. However, you should also check your eligibility for government-sponsored loan modification programs because, with both federal and state programs available in most states, you may have a lot of compelling loan modification options to consider. Read on for an overview of each one to see how to qualify for mortgage help.


The Home Affordable Refinance Program, or HARP, aims to help homeowners refinance their mortgage to lower their payments when they have little to no equity in the property. HARP is part of the Making Home Affordable program, which is part of a joint effort between the U.S. Treasury Department and the U.S. Department of Housing and Urban Development. It was initially set to expire at the end of 2016 but has been renewed to last through September 1, 2017. Qualifying homeowners can take advantage of several benefits by using HARP. In fact, over 3.4 million people have taken advantage of the program since its inception in 2009. You can save money by receiving a lower interest rate, reduce your loan term, or switch from a variable to a fixed-rate mortgage.

Even if you typically wouldn’t qualify for a traditional refinance, HARP may still work for you. There’s no minimum credit score required and you don’t need any equity in your home. In fact, your loan-to-value must be more than 80% and you can even be underwater on your mortgage and still qualify. Most homeowners won’t need to have an appraisal performed, so the process is faster and more cost-efficient than a traditional refinance.

Some of HARP’s requirements, however, are quite strict. For example, you won’t qualify if you’re behind on your mortgage. You also can’t have any payments made more than 30 days late in the last six months, and can only have one such late payment in the last year. Your loan must have been originated no later than May 29, 2009 and must be owned by either Fannie Mae or Freddie Mac. If you’re unsure, you can follow the links to a loan lookup tool and double check. It’s a great choice if you bought or refinanced your home at the wrong time and the monthly payment obligation is beyond your means.


While HARP focuses homeowners who are up to date on their mortgages, the Home Affordable Modification Program (HAMP) is a part of the Making Home Affordable program that helps those who have fallen behind on their payments. The program ends December 31, 2016, so you need to act quickly in order to take advantage of these benefits. On average, the program states that homeowners save approximately $500 per month on their mortgage payments through a number of loan modification options. HAMP can adjust your interest rate, extend your loan term, reduce your principal balance, or place the loan in forbearance.

To qualify for HAMP, you must be going through a financial hardship that makes it difficult to meet your monthly payments. It’s also ok if you’re already delinquent on your payments. However, your loan must have been take out on or before January 1, 2009 and  you can’t owe more than $729,750 in principal. Eligible properties can either be your primary residence or up to a four-unit rental property.

You can also qualify for HAMP if you owe more on your home than it’s currently worth. If your loan-to-value is greater than 115%, you’ll automatically be considered for a mortgage principal reduction. HAMP also offers an incentive for making timely payments. You could earn up to $10,000 towards reducing your principal just for paying your mortgage on time. If you’re worried about meeting your payments or have already fallen behind on your mortgage, consider applying for HAMP to lift a huge part of your financial burden.


The Home Affordable Foreclosure Alternatives Program (HAFA) is another part of the Making Home Affordable initiative. It targets homeowners facing foreclosure by providing them a way to leave their homes in a less detrimental way. You can be relieved of your mortgage debt in one of two ways: a short sale or a deed-in-lieu of foreclosure. As an added benefit, you can also receive $10,000 towards relocation assistance.

In order to qualify for HAFA, you’ll need to meet a few requirements. First of all, you must have begun your mortgage on or before January 1, 2009. You’ll also need your mortgage company to participate in the program. Most major national banks do, but you can double check here. You must be in some type of financial hardship and either be behind on your mortgage payments, or in danger of becoming delinquent. The maximum loan amount on the home is set at $729,750 and the program applies to both primary residences and rental properties.   

If this sounds like an ideal program for you, keep in mind that HAFA ends on December 31, 2016.

MyCity Modification

Specific to the City of Detroit and Cook County, Illinois is the MyCity modification program. This is a very aggressive loan modification program that can see principal reduced by as much as 60%. The program is particularly attractive to distressed homeowners who do not qualify for other programs including those going through an active bankruptcy. Basically, if you live in either of the covered areas, MyCity is very compelling.

Keep Your Home California

In addition to the two federal programs discussed above, the California Housing Finance Agency (CalHFA) also offers a homeowners assistance program called Keep Your Home California. It’s actually part of a federal program funded by the Treasury Department called the Hardest Hit Fund. There are several different programs available as part of California’s initiative, each targeting a different type of homeowner. The first is Unemployment Mortgage Assistance, which is designed for homeowners who receive unemployment benefits. If you qualify, you could receive up to $3,000 a month to go towards your mortgage payment for up to 18 months while you search for a new job.

CalHFA also offers a Mortgage Reinstatement Assistance Program. Low- to moderate-income homeowners can receive up to $54,000 to help catch up on delinquent mortgage payments. There’s also a principal reduction program designed to help homeowners struggling with a financial hardship and either owe more than the property is worth or cannot afford their current payments.

Thank Washington for HARP and HAMP!
The government sucks in many things that they do but, if you’re in a mortgage payment pickle, some of the loan modification programs are very generous.

Synopsis: Act Quickly When Considering a Loan Modification

No matter what kind of financial difficulties you’re having, make your mortgage a priority. It’s always wise to tackle the problem as soon as you realize it exists; if you wait too long, you run the risk of losing out on opportunities to modify your loan. Talk to your lender (while not a lender, Point customers can avail of free counseling and advice on these programs from our partner BALANCE) and check your eligibility for homeowners assistance programs — whether it’s a loan modification or something else. They can really make a difference in your financial future and when you consider the scale of these programs, you can be sure you’re in sizable company:

  • ~3.5 million homeowners have used HARP
  • another 2 million homeowners have used HAMP
  • approximately 6 million homeowners have received a proprietary mortgage loan modification

Loan Modification Program Eligibility Requirements Available Assistance Deadline Link
  • LTV must be greater than 80%
  • Your home value has decreased
  • must be current on mortgage payments
  • no late payments in the last six months
  • only one late payment allowed in the last year
  • loan must be owned by Fannie Mae or Freddie Mac
  • must have been closed on or before May 31, 2009.
– Receive a lower interest rate

– Reduce your loan term

– Switch from a variable to a fixed-rate mortgage

September 1, 2017
  • Must have difficulty making payments due to financial hardship
  • loan no more than $729,750 for 1-4 unit properties (higher for 2-4 unit properties)
  • must have been originated on or before January 1, 2009
  • Property has not been condemned
  • high LTV ok!!
– Adjust your interest rate, extend your loan term

– Reduce your principal balance

– Place the loan in forbearance

December 31, 2016
  • Must have difficulty making payments due to financial hardship;
  • loan no more than $729,750;
  • must have been originated on or before January 1, 2009.
  • mortgage company must participate
– Avoid foreclosure through short sale or deed-in-lieu December 31, 2016
  • Loan is owned by Fannie Mae
  • The property is in Detroit or Cook County, IL
  • Active bankruptcy not cause for disqualification
– Up to 60% reduction in principal and interest payment

– Extend mortgage term to 40 years

Keep Your Home California
  • Suffering from a financial hardship;
  • may need to be behind on mortgage payments
  • must be collecting unemployment benefits to qualify for unemployment mortgage assistance.
– Unemployment Mortgage Assistance:

  • Up to $3,000 per month

– Mortgage Reinstatement Assistance Program:

  • Up to $54,000
Ask your bank!!!
  • Varies
Varies NA See your bank’s website



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