What Is the Difference Between HAMP Tier 1 and HAMP Tier 2?

The HAMP program ended in 2016. Learn what options are generally available to homeowners now facing a foreclosure.

By , Attorney

The federal Home Affordable Modification Program (HAMP) modified borrowers' home mortgages to make them more affordable so struggling homeowners could avoid a foreclosure. The two levels or "tiers" under HAMP were: Tier 1 and Tier 2. Unfortunately, the HAMP program stopped accepting applications as of December 31, 2016.

Still, if you want to learn the difference between Tier 1 and Tier 2, how HAMP worked—and some of the programs that are currently available to help homeowners—read on.

How the Federal Making Home Affordable Program Worked

The Obama administration introduced the Making Home Affordable (MHA) program in 2009 to help homeowners avoid foreclosure. One popular program under MHA was the Making Home Affordable Modification Program, called "HAMP."

How HAMP Worked

HAMP, which was announced on March 4, 2009, was the most popular MHA program. Borrowers who had a steady income, but were struggling to keep up with mortgage payments, were often able to modify their loan through a HAMP Tier 1 or HAMP Tier 2 modification.

HAMP Tier 1

HAMP Tier 1 was a basic HAMP modification. Under Tier 1, a homeowner's monthly mortgage payment, including principal, interest, taxes, insurance, and association fees, was reduced through a series of successive steps (called a "waterfall") so that it equaled 31% of the homeowner's gross monthly income.

HAMP Tier 2

Effective June 1, 2012, the Obama administration expanded the HAMP program to borrowers who did not meet the eligibility requirements under the existing program (HAMP Tier 1). HAMP Tier 2 was available to homeowners who, for example, wanted to modify a loan on a rental property or previously received a HAMP permanent modification, but defaulted in their payments, and lost good standing. (Borrowers lost good standing if they fell 90 days or more behind on their payments under a HAMP Tier 1 permanent modification.)

Again, HAMP was closed to new applications as of December 31, 2016.

HAMP Has Expired, But Other Loss Mitigation Options Are Available

Even though HAMP is a thing of the past, you might qualify for another type of loss mitigation program.

If you decide that it's time to give up the property, you might be able to arrange a short sale or deed in lieu of foreclosure.

How to Apply for Loss Mitigation

To apply for a loss mitigation option, you usually must submit an application along with supporting documentation like pay stubs, tax returns, and bank statements to your loan servicer. Once you submit a complete application, under federal law, the servicer generally can't initiate or continue with a foreclosure until it reviews your application and:

  • informs you that you're not eligible for any loss mitigation option (and any appeal has been exhausted)
  • you reject all loss mitigation offers, or
  • you fail to comply with the terms of a loss mitigation option such as a trial modification.

Getting Help

If you need help working out a modification or another way to avoid foreclosure, consider contacting a foreclosure attorney or a HUD-approved housing counselor.

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