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HAMP Participants Are Now Eligible for an Additional $5,000 in Principal Balance Reduction


It sounds like Christmas came early this year…borrowers who already received loan modifications via the Home Affordable Modification Program (HAMP) are now eligible for expanded benefits.

As it stands, borrowers taking part in HAMP who stay good on monthly payments can earn up to $5,000 in principal balance reduction over the first five years of their modification.

But now HUD and the Treasury are sweetening the deal. Under revised guidelines announced today, roughly one million borrowers are eligible to receive another $5,000, which will also be applied toward the principal loan balance in the sixth year of their loan mod.

This means borrowers can shed a total of $10,000 off their outstanding loan balance, which will certainly help them get their heads above water, assuming they aren’t already.

Additionally, borrowers will be given the opportunity to re-amortize the reduced mortgage balance, which will lower their monthly payment going forward.

Under normal circumstances, making extra payments to the principal balance reduces the overall interest expense, but it doesn’t lower subsequent monthly payments.

So this change will help borrowers build equity and lower payments even further.

Changes Coincide with HAMP Payment Resets

This change happens to come at a time when interest rates on HAMP loan mods are scheduled to increase.

After five years of monthly payments via a HAMP loan mod, the interest rate will increase one percent or less per year for three or four years until it reaches the market rate at the time of the modification.

Secretary of the Treasury Jacob J. Lew noted that scores of homeowners continue to struggle with their mortgage payments in spite of the strengthening housing market.

After all, just because a home is worth more doesn’t mean the payment is more affordable, there’s just more incentive to pay it.

He added that the changes are “meaningful incentives for borrowers to stay current in their modifications,” while also giving them an opportunity to build equity in their homes.

Borrowers with HAMP Tier 2 loan mods, which provide a low fixed rate for the life of the loan to those who don’t qualify for HAMP, will see their interest rates get slashed by another 50 basis points.

They will also be eligible for the $5,000 pay-for-performance incentive if they are in good standing at the end of the sixth year of their loan modification.

Lastly, borrowers receiving benefits under the Home Affordable Foreclosure Alternatives (HAFA) program will see relocation assistance bumped up to $10,000 from $3,000 to “better reflect increased rents and the cost of moving in many parts of the country.”

HAMP was launched back in 2009 to help delinquent homeowners (or those in danger of falling behind) keep up with mortgage payments.

The program has reduced monthly mortgage payments for over a million borrowers via interest rate reductions, extended mortgage terms, and in some cases, principal balance reductions.

Despite this, many borrowers have been unable to make even the modified payments, with re-default rates on loan mods often remarkably high, though they seem to have improved along with the housing market as a whole.  It seems HUD and Treasury want to keep it that way.

If you’re currently making mortgage payments under HAMP, you might want to get in touch with your loan servicer to see how you can take advantage of these new incentives.

35 thoughts on “HAMP Participants Are Now Eligible for an Additional $5,000 in Principal Balance Reduction”

  1. What does one have to do to receive this? We have been in good standing for over 5 years now. Do we have to request this formally or is it going to just take place within our Mortgage Company. We did receive letter from our Mortgage company saying we are eligible for the Principal Balance Reduction. Tnank you for any information you can supply us.
    Shelly L

  2. Hey Shelly,

    You may want to follow up with your loan servicer instead of waiting for them to take action just to ensure that you get the principal reduction. Like anything else being proactive can get the ball rolling sooner.

  3. So, I was approved for my modification in February. Did my three (3) month trial and the modification became active with my first payment in June, 2015. I was told that I would receive the $5,000 if all my payments were made on time. Will I qualify for the additional $5,000? BTW, my mortgage is with Chase.

  4. Colin, my wife refinanced her house with HAMP in 2012. We got married this past April 2015 and live in my house. Currently her parents live in the HAMP house, but she still pays the mortgage on it. Can she get in trouble if she buys rental dewelling insurance which is $400 cheaper for the year? or could that hinder her in the current HAMP or in any way when she refinances if the rate goes up too high after year 5? I just don’t want the mortgagee to see she got rental property insurance instead of homeowner insurance and they’ll complain or somehow take her out of HAMP and raise her rates.

  5. Daniel,

    Perhaps read the HAMP paperwork to see if there’s an occupancy requirement and/if so a penalty for violating it.

  6. I received 5000 and now another 5000 on principal ,but can I refinance now for 15 years fixed because my financial situation has improved

  7. Donley Ingwaldson

    We have completed our loan modification with 100% payments on time for 5-years. We received $1,000 per month for a total of $5,000.00. But we have sold our home prior to collecting the additional $5,000.00 and have no modified loan on our new home only a VA loan. Can the offered extra $5,000 be sent to us direct? We qualified just sold before we received the bonus $5,000.00.

  8. Donley,

    Not sure, you may want to look into the program’s terms and conditions to see if an early sale disqualifies you from the extra bonus.

  9. I have a principal forgiveness modification and will complete the 5-yrs trial period on September this year. On the same month, the interest will go up 1% and will increase my monthly mortgage by $125. Interest will go up 1% each year until it hits the cap. Am I able to refinance and borrow some money for my son’s college finances?

  10. Melissa,

    You may want to check the terms of your modification and/or speak with some lenders/brokers to see what you’re able to do. It may also depend on your equity position on your property.

  11. We were eligible for the $5,000 6-yr incentive and we had filled out and sent in the paperwork back in the summer of 2015. Our 6-yr anniversary was in March 2016 and that came and went without seeing that incentive applied. I have called Green Tree (now Ditech) three times now and have never gotten a call back. How do I file a formal complaint? I suspect Ditech may have gotten the incentive and never applied it to our loan.

    Thanks in advance for any assistance you can provide.

  12. Cathy,

    Most folks are referring to the CFPB these days when they have a general banking/mortgage complaint.

  13. HI, I have a principal forgiveness modification and will complete the 5-yrs trial period in April this year. We too are having our interest rate go up 1% each year every May until the cap. Should I refinance now, I don’t want to lose out on the other 5000 incentive. Should I refinance through my mortgage company or try different lenders?

  14. I received a HAMP modification in 2013. My mortgage is with Chase. I am supposed to be receiving incentive yearly principal reductions. So far none have been forthcoming. I have attempted multiple times to get clarification from Chase about the matter. I have been told that there’s nothing documented therefore I am not eligible unless I can show proof. How do I get this resolved?

  15. Jacqueline Montgomery

    Has anyone received their HAMP Pay For Performance Incentive through Bank of America? I just need to know if there is another person like me who has not received one thing as promised???

  16. Colin, The HUD and FHA contacts I could find have all referred me to my current servicer, who has told me the paperwork has to be submitted to them, but they don’t know where it comes from. I see the link above with the announcement – do you have any additional information about who to contact to take advantage of this incentive?

  17. Griffin,

    It was a joint HUD/Treasury announcement from back in 2014 that gave no concrete details about how the $5,000 would actually be administered. But I would guess the servicers should have received more detailed guidance and should know about this incentive and how to apply it to a homeowner’s mortgage.

  18. I now have my house for sale on the 5th year of my modification. Do I lose the 5,000 when I sell or is it prorated?

  19. Marina,

    What did your paperwork say? I’m guessing it was covered in the terms and conditions when you signed up for the modification.

  20. I have worked and finalized my HAMP and 1 mth past year 6. Now PNC bank says your “tier 2” of hamp, sure you got a principal reduction over the 1st 5 years, but we dont give you another $5000. I know this is incorrect regardless of tier’s. So today i went directly to Fannie Mae who helped originally as PNC refused to do the hamp in the 1st place. Wish me luck !

  21. Robbi! I am in the same predicament. Did you have any luck collecting the additional $5,000? And if so what were the steps?

  22. I sure hope you’re still around, Colin. I just completed 5 perfect years of mortgage payments under a HAMP modification and Citimortgage is trying to tell me that I won’t see $5,000 till year 6, but the HAMP site states “Through the Home Affordable Modification Program (HAMP®), you could earn up to $10,000 in principal reduction just for making your mortgage payments in full and on time—up to $1,000 per year for the first five years and a $5,000 one-time payment at the end of year six.

    Key word being “and”. I’ve filed a complaint with Consumer Financial Protection Bureau which was no help (to me) at all. Do you know where else I can file a formal complaint?

  23. Hey Pamela,

    Sorry to hear that – the CFPB is the agency I’d probably think of too. Other than that, the lender/servicer directly or perhaps reaching out to Making Home Affordable directly. Good luck!

  24. My husband and I just received the $5,000 recast paperwork from Ocwen. The paperwork says the $5,000 will be applied to our principle balance once we sign the paperwork and return it; however, I’m confused. If we accept the recast, the total amount of interest paid over the life of loan will go up over $6,000. I called Ocwen and asked why the interest over the life of the loan will go up instead of down, and I could not get a clear answer. We were approved for a HAMP loan mod in 2011. We have made all payments on time.

  25. Pamela, I too finished completion of 6 years in this program and if not for my calling in my monthly payment as the norm, and hearing that my last payment received was $5000.00, I wouldn’t have known I received the extra incentive, nor any at all. My first lender I believe kept the first five payments of $1000.00 and now the new servicer that my mortgage was sold to hasn’t made me aware of the amount of $5000.00 that they received on my behalf and in fact are offering to recast the mortgage(the HAMP) expired in December 2018, they want to charge me $5000.00 in interest to do so, imagine that!
    I’ve filed a complaint with the HAMP program and have been assigned a case number, I will be filing one with the Federal Housing Authority and the CFPB. If not held to standards, these predatory lenders have in fact tried to keep the incentives and that’s not acceptable by me. I met my end of the deal and they will be held to theirs. The program should have at the very least notified participants at the end of the terms that payment had been or hadn’t been paid to the lenders on their behalf, as it originated at the government level. Another failed Obama policy, where the rich get richer and the poor get ripped off. Beware of M&T Bank and SPS Lending.

  26. Felicia Regail Jackson

    Do the homeowners receive the 1st $5000 payment directly in the form of a check or is it only to be applied to Mortgage Balance?

  27. I am wondering why after my “modification” do I owe more than what I paid for my home in the first place? Is this common? I paid $122 in 2008, did the modification in 2014 and even now, 6 years later, and after getting the $10k reduction off the principle the total with both notes is $120k. I feel like me doing any improvements is a waste of my money. Where and how do I get any equity??

  28. Hi Jodi. Can you please provide the phone numbers and website for HAMP and other agencies you filed complaints with?

  29. Chase and I agreed to forbearance in April 2020.
    My HAMP 5k Principal was due to be credited in July 2020.
    Chase has said that since I was technically considered “delinquent” because of the mortgage being in forbearance I would not be receiving the 5k this year or the additional 5K next year either.
    Basically because of the Covid related forbearance I was punished by being disqualified due to the account being delinquent.
    This seems like a snafu?

  30. Hi D Griffin,

    Might be able to make an argument with the CFPB if Chase isn’t playing ball, given it being an unexpected circumstance that affected most everyone. Good luck.

  31. I been in my home for 22 years and I still show that I owe 50.000 I don’t know where my money went

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