Friday, June 18, 2010

HAMP Modification

"The Making Home Affordable Program is structured to produce modifications that are more likely to test NPV positive, increasing the number of modifications that will be done and keeping more Americans in their homes." If eligibility criteria for HAMP are met, the servicer will adjust the terms of the mortgage to reduce the borrower's payment to HAMP's target front-end debt-to-income (DTI) ratio of 31 percent. Servicers are required to "reduce payment in the precise manner specified" by HAMP (the "Standard Waterfall") starting with reducing the interest rate on the mortgage. Once the modified loan terms are known, the NPV model calculation is run.