$5K Extra Reward on Offer for HAMP Borrowers

The government is throwing in more incentives to keep borrowers who modify their loans through the Home Affordable Modification Program current on their mortgages. HAMP borrowers who pay on time can earn an extra $5,000 in their sixth year of payments. That's on top of the $5,000 borrowers are already eligible for if they make on-time payments through the first five years of their loans, the Treasury Department and Department of Housing and Urban Development announced this week.

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Borrowers stand to get $10,000 in incentives for on-time payments, which all goes toward reducing their principal balance. HAMP will then give borrowers the option to re-amortize the reduced balance in order to lower their overall monthly payments, the Treasury Department said.

An estimated 1 million home owners with HAMP loans will likely be eligible for the additional $5,000 incentive.

The extra incentive comes at a time when about 30,000 HAMP loans are to reset this year. When the loans begin to reset, the interest rate will rise by one percentage point per year until it reaches the agreed upon rate when the modification was created. Reset rates will range from 4 percent to 5.4 percent.

Also this week, the Treasury Department announced that distressed home owners who complete a short sale or deed-in-lieu will now be offered $10,000 in relocation assistance, a $7,000 increase over what they previously received. And there's an extra incentive for borrowers in the HAMP Tier 2 alternative program, which provides a low fixed interest rate for borrowers who were unable to qualify for a standard HAMP modification. HAMP Tier 2 alternative borrowers now are able to pay a 50-basis point lower interest rate and earn the $5,000 incentive if they make on-time payments by the end of their sixth year.

"While the housing sector has strengthened in recent years, there are still many homeowners struggling to make their mortgage payments," says Treasury Secretary Jacob Lew. "The changes we are announcing today offer meaningful incentives for borrowers to stay current in their modifications, increase their opportunity to build equity in their homes, and provide vital safety nets for those facing greater financial strains."