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Why are HAMP loans denied?

Owning a home is part of the American dream. Whether you are young, middle-aged or elderly, owning a home is not only a major achievement; it is something a person or family seeks to maintain. Unfortunately, financial hardships can put a damper on this dream, causing a person to be unable to afford the home they want or currently have. Suffering a foreclosure is anything but easy, and individuals seek to halt or prevent one from ever occurring. Thus, mechanisms have been designed to help those in this current financial crisis.

Back in 2009, the Obama administration created the Affordable Modification Program or HAMP. This program was the response to the housing crisis and had the intent of saving four to six million homeowners from facing foreclosure. The main vehicle in HAMP used to save homes would be through loan modifications. By seeking modifications, homeowners could enjoy a reduced interest rate and lower monthly payments on their home loans facing foreclosure. The idea was that these modifications would prevent a large number of foreclosures from occurring.

Those approved for modifications experienced the benefits the program intended; however, those deemed ineligible would face the unfortunate reality of a short sale or enduring the wait of being foreclosed upon. Based on statistics, 1.654 million 1st mortgage permanent modifications were granted out of the 2.447 million trial modifications approved. While this might sound impressive to some, this is actually far away from the numbers promised, which were between four and five million.

Based on data, only 25 percent of the seven million loan modification applications submitted under HAMP were approved. The main reason for these denials include net present value, the inability to create an affordable payment plan, no disposable income, failure to proved necessary documents, too many previous modifications, investor does not allow for modifications, having equity in the home, purchased a new vehicle in the past year or the homeowner denied an offered modification and payment plan.

If you have been denied a HAMP loan, it is important to understand what caused your denial and what options are available to you. It could be helpful to consider what legal steps you could take, especially if you are facing an impending foreclosure.

Source: Spartareport.com, "How To Figure Out Why Are Your HAMP Modifications Are Being Denied," Patrick Pulatie, Jan. 26, 2017

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