HAMP, HARP and Hope: Expanded Mortgage Relief for Homeowners

Recent expansion of the federal government's Home Affordable Refinance Program (HARP) is intended to help a larger share of borrowers who have been denied refinancing options due to a tighter lending environment. Underwater homeowners who have kept up with payments on Fannie Mae or Freddie Mac mortgages may be eligible for relief from the HARP program.

For those in deeper financial straits, the Home Affordable Modification Program (HAMP) can limit monthly mortgage payments to less than a third of an eligible borrower's monthly pre-tax income. HAMP eligibility is limited to those with a balance of less than $730,000 on a primary residence who can demonstrate financial hardship and other factors.

HARP and HAMP are good examples of mortgage loan modification strategies that can provide significant help for borrowers who are best served by targeted debt relief strategies. While both Chapter 7 bankruptcy and Chapter 13 bankruptcy provide foreclosure protection for homeowners, individuals and couples who are mostly burdened by home-related debt may not necessarily need the advantages of liquidation or consolidation of credit card debt, medical bills and other obligations.

Recently announced changes to HARP include eliminating an eligibility limit that restricted HARP to properties that had a 125 percent or lower ratio of mortgage balance to estimated property value. The intent of the changes is to target mortgages that originated in the higher interest years of 2004 to 2008, while incentivizing more lenders to participate.

The threshold debt ratio has been changed to 80 percent or higher, meaning even some homeowners who are not underwater may be able to secure a more affordable and stable mortgage, as well as lower monthly payments. While federal officials estimate that the changes to HARP could help up to 1 million borrowers, economic experts estimate that at least 11 million American borrowers face the challenges and bleak prospects of an underwater mortgage.

Recent news of a major foreclosure abuse settlement between the federal government and the country's largest mortgage servicing companies will provide further relief for distressed homeowners. A loan modification lawyer can explain how HARP, HAMP and other federal and state programs can work together with other debt relief options to restore a family to sound financial footing.