How Does the Making Homes Affordable Program Work?

The Home Affordable Modification Program, which aims to stabilize the housing market and help homeowners who are struggling to pay their mortgages, was introduced in February 2009 as part of Obama’s Financial Stability Plan.

The Financial Stability Plan attempts to address the key problems at the heart of the current economic crisis and to get our economy back on track. According to the Making Homes Affordable website, over one million homeowners have received help under the program, and it is on track to offer help to 3 to 4 million homeowners by 2012.

The program, itself, however, is considered by some to be confusing, as there are many moving parts.

There are several sub-programs that homeowners can choose from under this program, all of which aim to help the homeowner stay in their home or transition to more affordable housing, such as the HomeAffordable Foreclosure Alternatives Program.

Let’s take a look at how the loan modification process works within the Making Homes Affordable Program.

A home loan modification is similar to a mortgage refinance except that instead of looking for an entirely new loan, your existing loan is modified. In today’s economic environment, many homeowners are unable to make their mortgage loan payments because of financial hardship.

It’s not necessary to miss your mortgage payments to qualify for the Making Homes Affordable Program, but it certainly doesn’t hurt. The only place where you can get a loan modification is with the lender that services your existing mortgage loan. Each lender, however, has different loan modification programs and processes.

To be eligible, you must have experienced a documented hardship or change in financial circumstances, missed three mortgage payments (90 days delinquent) or more (although this is not always the case), own and occupy the property as a primary residence, and not have filed for bankruptcy. If you pass this initial screening, most often, the lender will then require verification of income levels, tax returns, etc. so that the bank has enough documentation to evaluate the risk in modifying your mortgage.

Once all the paperwork is in order, which can take up to several months, and if the lender wants to move forward, you will generally be asked to make trial payments for several months. The original time frame for trial payments is around three to six months; however, as lenders have been inundated with requests for loan modifications, the trial period has been extended.

If ultimately approved for modification, you will begin making new monthly payments, most often at the same amount at which trial payments were being made.

The homeowner should be certain to understand how the loan modification can impact his/her credit and just how long the entire process takes. The impact to your credit will largely depend on how the lender reports it to the credit bureau; in the short term it could result in a drop in your credit rating, but avoiding a foreclosure will benefit you in the long-run.

Most people that apply for this program are already experiencing some sort of financial difficulty which has caused them to miss mortgage payments, thereby impacting their credit.

Remember, the Obama Home Loan Modification Program is different from other programs such as the Federal Housing Finance Agency Loan Modification Program. Ensure you understand what program and subset of each program works for you. Most important, be patient as the entire process can take months.

Published or Updated: April 21, 2014
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. lori says:

    Ridiculous is all i have to say…. i have provided all the paper requirements, made all trial payments on time and still am doing so.. and the reason they are denying me is they could not read my bankstatements insitutions name on the paperwork…. 7 months of nothing… I AM FIGHTING THIS TO THE END… (i am a single mom and if i can conquer that job… HELL BOA is easy!!!! (I need this help)!!! I work full time, and want my home… just hit hard times right now!! but i have FAITH

    • Darlene says:

      So do they want you to go back to paying regular payment after the trial ones? I am about to apply but not feeling really good about this!!

  2. Briana @ GBR says:

    There’s so many programs out there, it can definitely get confusing. Is it possible to apply any of these sub programs with other programs out there, like combining them?

  3. EMMA says:

    I SAW THE PROGRAM ON THE 12:00 NEWS ABOUT BANK OF AMERICA AND I FEEL THE SAME WAY AS THE WOMEN WHOM HUSBAND DIED FROM CANCER. I TOO HAVE BEEN WAITING TO HEAR FROM THAT SAME BANK, DUE TO THE FACT I HAD LOST MY RIGHT AND DOMINATE ARM IN A WORK ACCIDENT AND LOST 2 JOBS IN ORDER TO MAKE MY HOUSE PAYMENTS. I ALWAYS GET THE RUN AROUND. I TRYED THE PHONE NUMBER THAT TV 6 GAVE AND FOUND THAT THE NUMBER IS DICONNECTED.

  4. bill says:

    Bank of America SUCKSSSSSS Should be called Bank of screwing America?

  5. Lori says:

    I did the trial payments and was told upon completion I would get a permanent modification for the trial payments………2.5 years later, I am still fighting. Bank of America LIES, does not return calls, has ill-informed employees, and are just trying to get peoples homes. The value of my home has dropped by 50%, I am eligible by the MHA requirements but am now told that the ‘investor’ would have to wait too long to receive their payments……..and would rather make me homeless and have my home remain vacant and receive no money at all. I put $66K down on my home, was fired from my job for refusing to commit fraud against the Federal government, and no one is doing anything to really help. BOA is screwing the people who didn’t purchase above their means just because they can and the government is allowing it. I have lost all hope in our govt. and hope that they all get their comeuppance soon. Losing a job for doing the RIGHT thing apparently is the wrong thing to do in The United States of America because I have been taking it up the whazzoo ever since.

  6. Belinda says:

    i am beginning to wonder if there really is a thing called homemodification.gov!!! Everytime i send in the required documentation there is an issue with it. I’m sure President Obama would not like to hear, over the evening news, all the problems we people are having while trying to work with this program!!!

    • DR says:

      There have been a lot of problems with the program. Perhaps there is somebody at HUD that you can speak with to help get the paperwork processed.

  7. Wendell Link says:

    Application was a breeze. Nationstar Mortgage was great. This program works. Kept me in my home following a serious illness. Thank goodness I’m not using BOA!

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