FAQs on New Help for FHA Borrowers

September 21, 2009 · Posted in News For Homebuyers

On August 15, homeowners having trouble making payments on FHA mortgages started getting help under the same program that’s been available for people with Fannie Mae and Freddie Mac mortgages. The FHA-Home Affordable Modification Plan (or FHA-HAMP) is designed to significantly reduce a borrower’s monthly mortgage payment to bring it in line with her budget. Since FHA-HAMP has been out, these are the FAQs coming to our site:

1. How can I be sure I have an FHA mortgage? If you bought your home with a low down payment, it’s likely you have one of the 4.8 million FHA mortgages out there. Check the documents you received at closing or ask your lender or loan servicer. You can also visit our website for individual help with this – and don’t worry, all our services are absolutely free to you.

2. Can I qualify for an FHA-HAMP loan modification if I’m current with my mortgage payments? No. FHA borrowers must be at least 1 month behind in their payments to be eligible for an FHA-HAMP loan modification. But an estimated 14% of all FHA loans are 30 days or more past due, so lots of people should be eligible for help.

3. How does the FHA-HAMP program go about making my mortgage payment more affordable? The program helps create a loan modification, working with your lender. The principal is reduced by an amount that brings your monthly payment to no more than 31% of your gross income. This reduction in the principal can be no more than 30% of the outstanding balance.

4. When and how is this principal reduction paid back? A subordinate loan is made for the principal reduction, plus any unpaid interest, property taxes, homeowner’s insurance premiums and other costs. No interest is charged on this subordinate loan, but the deferred money becomes due when you pay off the principal loan, or when you refinance or sell your home.

5. Why should the lender and I participate in FHA-HAMP? You avoid foreclosure and live in your home for a more affordable monthly mortgage payment. You also get $1,000 a year from the government for 5 years, which is applied to the loan balance to reduce the deferred amount due at the end. Your lender avoids the costs and probable losses involved with foreclosure and gets an incentive fee up to $1,250 from the government to modify the loan.