HAMP and Chapter 13 Bankruptcy

Yet more proof that HAMP alone may not be enough to save your home from foreclosure:

Some struggling homeowners say they’re being unfairly foreclosed on despite making all their payments under trial mortgage modification programs.They equate that to mistreatment by banks who agreed to help borrowers when they took part in the government’s $700 billion Wall Street rescue.

If you’re lucky enough to have gotten through the HAMP application process and have been given a trial modification program, as this article makes clear, it doesn’t mean you’re out of the woods.

Your HAMP trial modification is based on a formula that requires you to make a payment based on your income and suggests that your mortgage debt-to-income ratio should be 31% of your gross (pre-tax) monthly income.  The trial modification will give you a reduction if you qualify for a modification. (See the calculator at http://www.makinghomeaffordable.gov/payment_reduction_estimator.html).

However, if your trial payment is less than what your current payoff of the loan would be at a 3.0% fixed interest rate over 30 years, it is unlikely you will be approved for a permanent loan modification and you could be headed for foreclosure.

Don’t take that risk!  If you have received a foreclosure notice from your bank, regardless of your process in the loan modification you should consider filing a Chapter 13 bankruptcy.  A Chapter 13 cannot change the terms of the loan you already have–it can only cure existing arrears over time and strip off wholly unsecured second mortgages. But a HAMP loan mod combined with bankruptcy may be the ticket to solve your problems. You have the security to know that the bank cannot foreclose on you because you have filed a bankruptcy, which gives you that assurance and protection, and you can still pursue the HAMP loan modification process while in BK.

Also, Seattle Debt Law, LLC has just recently agreed to assist in the HAMP loan modification process through the use of a special computer portal that cuts through the hassle of spending hours on the phone with the bank counselors, better known as the “Burger King Kids,” and you will have the piece of mind that your situation is being taken care of.

For more info on the “Burger King Kids” issue, see this October 13 New York Times article.