Home Affordable Modification Program - HAMP

DEFINITION of 'Home Affordable Modification Program - HAMP'

A loan modification program introduced in 2009 to promote stability in the housing market. The Home Affordable Modification Program (HAMP) was aimed at helping homeowners who were devoting more than 31% their of gross income toward mortgage payments. Eligible homeowners can receive adjustments to the mortgage principal, interest rate or payments in order to get the percentage of income going to payments below 31%.

BREAKING DOWN 'Home Affordable Modification Program - HAMP'

The government refers to the ratio of payments to gross income as the front-end debt-to-income (DTI) ratio. Working in conjunction with mortgage lenders, the HAMP program provided incetives for banks to reduce the DTI ratio to less than or equal to 38%; the Treasury will then step in to help reduce the DTI ratio to 31% or less. Mortgage servicers received an up-front payment of $1,000 for each eligible modification they performed plus up to $1,000 per year for up to three years while borrower is in the program.

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