We got a HAMP modification from Citi to our original home loan. The modification includes a staggered principle reduction and a new interest rate.
My question is does that change my status with NACA? Because I’ve modified the loan is it considered a new loan by NACA?
No, a modified mortgage is not considered a new loan. The terms of the existing mortgage have been changed, but it is still the same loan.
A HAMP modification by definition fixes your interest rate for the first five years to as low as two percent based on your affordability. In the sixth year, the rate raises by one percent, and continues to do so each year until it reaches the market rate in place on the day the modification was granted.
The inherent flaw in the HAMP program that NACA has always taken issue with is the fact that the hardship of many homeowners is permanent, such as disability, forced retirement, death or divorce of an income earner and so on.
In these cases, the household income is not going to increase to compensate for the increased mortgage payment that will happen in year six, making the mortgage unaffordable all over again. We are already starting to see this phenomenon happen with homeowners who received HAMP modifications in late 2009 and early 2010.
Once the HAMP modification has been made permanent, the homeowner must make at least one year of on time payments before they are able to apply again, but they should indeed try again for a fixed rate modification before the initial five year period ends.