Government Mortgage Help: PRP and HAMP Options Explained

Foreclosures have been on the rise ever since recession started. Increased unemployment, declining household income, and unregulated bank behavior cause many homeowners to slip on their mortgage payments and face foreclosure. U.S. Government has made significant steps to regulate the mortgage industry, aiming to limit foreclosure rates through government-assisted mortgage reduction programs.Payment Reduction PlanPayment Reduction Plan, commonly abbreviated as PRP, is a governmental program aimed to make mortgage payments more affordable to American families. It allows for reduction of mortgage payments up to 30%, depending on individual circumstances. The great benefit of PRP is that it is available to people who have already defaulted on their mortgages and who are not eligible for the Home Affordable Modification Program. This program is also excellent for homeowners who own more than one house, as it allows for participation of non owner-occupied properties. The forbearance period under this program is six months, during which both, the lender and the borrower, develop an acceptable repayment plan aimed to prevent foreclosure. In case the plan is a success, a loan servicer is compensated using general governmental incentives and a processing fee.Home Affordable Modification ProgramThe Home Affordable Modification Program (HAMP) is a vital solution for homeowners who use their property as a primary residence and are at a risk of foreclosure. HAMP has several criteria to include the following:- Financial hardship, causing a foreclosure or a risk of a foreclosure;- Loan origination date of January 1, 2009 or earlier;- Principal mortgage balance at the date of application being equal to, or lesser of $729,750;- Outstanding mortgage amount does not exceed 125% of the home market value.HAMP may help homeowners to reduce their payments by up to 50%, being no more than 38% of the monthly income of the homeowner, through a variety of instruments. Such instruments include interest rate reduction, loan period extension, and/or principal reduction. While lender participation is voluntary, lenders are encouraged to participate by attractive incentives and fees paid by U.S. Government. Every approved HAMP application gets lenders $1,000. In addition, lenders receive $1,000 every year for the first three years of timely modified mortgage payments made by the borrower. Responsible borrowers also get their chunk of government money under HAMP - $1,000 per year up to five years, provided they honor their obligations.Beware Of ScamsPeople who are desperate, risking losing their home, often fall the victims of scammers who offer guaranteed approval for PRP and HAMP and expeditious processing in exchange for a sum of money. Many scammers also make homeowners believe that there are fees associated with these government programs. Never pay any money for counseling or for guaranteed acceptance into these programs. Nobody can guarantee you an approval as these scammers do not have a final say in the application process. There is plenty of information available online listed on official program websites, as well as through legitimate participating lenders. In addition, there are well-qualified nonprofit agencies offering eligibility assessment and initial consultations free of charge that may help you to determine if you are eligible and advice of further steps you would have to take in order to benefit from PRP and HAMP.