Govt-Backed Loan Mods Coming for Investors

The Obama administration announced in late January an expansion of the nearly three-year-old HAMP loan modification program to now allow non-owner occupants to qualify for a loan modification under the government-subsidized program.

According to an announcement on, “help may be available” for “homeowners who currently have tenants and those who do not currently occupy their home, but intend to rent the property.” An article in Bloomberg News quoted Treasury Department Assistant Secretary for Financial Stability, Timothy Massad, as saying that non-owner occupants will be able to qualify for up to four loan modifications under the expanded program.

“When we started the program we focused on owner-occupied houses because the need was so great and we wanted to target the efforts to that group,” said Massad in the Bloomberg article. “Given where we are today, more and more people recognize that vacant properties are a problem no matter how they became vacant.”

Non-owner occupied properties accounted for 21 percent of the 710,000 properties in some stage of foreclosure as of the end of January, according to RealtyTrac. The percentage was higher in several states, including Hawaii (48 percent), Washington (32 percent), Nevada (30 percent), Florida (26 percent), and Arizona (24 percent).

Since the HAMP program began in April 2009, 1.8 million HAMP trial modifications have been given to homeowners, with 951,000 of those becoming permanent modifications, according to the U.S. Department of Housing and Urban Development’s monthly housing scorecard. But 25 percent of loans that were modified under HAMP since 2009 have re-defaulted, according to the Q3 2011 Mortgage Metrics Report from the Comptroller of the Currency and U.S. Treasury Department, which tracks mortgages comprising 62 percent of all mortgages outstanding nationwide.

In addition to being expanded to include help for non-owner occupants, the HAMP program deadline will be extended one year to Dec. 31, 2013 and will also be expanded to allow the following homeowners to receive help:

  • Homeowners who do not meet the 31 percent debt-to-income (DTI) requirement for a traditional HAMP modification;

  • Homeowners who didn’t successfully complete a HAMP trial period or;

  • Homeowners who fell out of a permanent HAMP modification due to missed payments.

Homeowners will be able to apply under the expanded program starting in May 2012.

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