Apply for Home Affordable Modification Program (HAMP) While Your House is Still Affordable 

Every person we know of who has gone through the Home Affordable Modification Program (HAMP) has found it very frustrating, because there are hundreds of pages of forms to fill out and you have to write the loan number on every page. The mortgage companies require bank statements, tax returns, a hardship letter, and the RMA (Request for Modification). Eventually, they will lose the application and say, “We never heard from you... do it again.”

By the time homeowners get through the application process, they are possibly a year and a half behind on their mortgage. When they contact us at that point, we have $35,000 to $40,000 in arrears to secure.

Sometimes people think that they are modifying their mortgage through the HAMP, but the mortgage foreclosure process is still going on behind their backs. There is nothing that says filing the HAMP will stop any pending foreclosure agreement. By the time these individuals come to us, they are so far behind on their house that bankruptcy is no longer such a viable option, because now they have $35,000 of arrears to cure on top of their normal mortgage payments.

While reorganization will allow anyone to save their home, you have to have the money for it, which would be the monthly mortgage payment PLUS an additional amount to cure the arrears - within the the 60 months allotted. If we're talking about $15,000 of arrears on a house, the additional amount would be $250 a month for the 60 months, so it becomes considerably more expensive going forward. The longer you wait to file a bankruptcy on your house, the less likely it is that you can keep your house.

We recently had a family come into the office that was already over $100,000 in arrears on their mortgage. They wanted to save their home, but their mortgage company said they they were too late by a couple of years. “Thanks for playing the game, and you owe us $123,000.” If the family wanted to keep the house, they would have to start making their regular house payments, plus an additional $2,000 a month for 60 months to cover the amount in arrears, which they obviously couldn't afford.

Had this family come to see us when they were only five or six months behind, or at least talked to us on the phone, we could have either helped them with the Home Affordable Modifications, to make sure their application was where it needed to be. If that was not possible, we could have at least stopped the arrears from climbing by filing a Chapter 13, even temporarily, while they were working on the HAMP, so the arrears didn't get out of hand. Homeowners need to file for HAMP while their home is still affordable.

This example is about a good Hoosier, a businessman from Carmel with a wife and two children, who owned his business for years. The market took a turn and he started to fall behind in his mortgage payments. The moment he fell behind, he was considered in default by the mortgage company, which wouldn't accept any more money from him and instead started to add to the arrears.

If you are feeling similar financial pressure as this family in Carmel, but don't want to end up in arrears like them, you should consider contacting us or another bankruptcy attorney. We would certainly, at least, help you fill out the paperwork for a loan modification. If you fall into default, it then becomes the bank's choice on whether or not you keep your house. This normally happens in 90 days.

If you are still within the 90 days, and have missed one or two of your mortgage payments, which can feel like the point-of-no-return, you can beat the bank to the punch by conferring with a good bankruptcy attorney. Even if the mortgage company does call it a default, homeowners can meet with us to see if there's a way out. A lot would depend on their current financial situation, but we have helped people with the HAMP process.

In the case of the family from Carmel, the wife had a job that requires a professional license/certification, which she could have lost for owing back taxes. A few types of certifications that could be affected by a home in default include:

- Medical doctor's license
- Pharmacy or dental technician license
- Attorney's license
- CDL license
- Driver's license
- Hair Stylist's license
- Cosmetology license

The loss of these licenses is determined by the Dept. of Revenue. The counter-intuitive part of this is that the DOR is trying to collect revenue, but are stopping people from being able to earn the money needed to settle their debts.

For more information, visit www.TomScottLaw.com or call (317) 786-6113.
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