Obama Home Affordability Calculator

Affordable Modification Formula:

\[ \text{Affordable Modification} = \text{Principal Reduction} + \text{Rate Adjustment to 31\% DTI} \]

Current Monthly Payment:

USD

Monthly Gross Income:

USD

Current Interest Rate:

decimal

Remaining Loan Term:

months

Affordable Modification (new payment, USD):

Principal Reduction (USD):

Rate Adjustment (decimal):

DTI (0.31):

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1. What is the HAMP Affordable Modification?

The Home Affordable Modification Program (HAMP) was an Obama-era program that helped homeowners avoid foreclosure by modifying loans to make monthly payments more affordable. The goal was to reduce payments to 31% of the borrower's gross monthly income.

2. How Does the Calculator Work?

The calculator uses the HAMP modification formula:

\[ \text{Affordable Modification} = \text{Principal Reduction} + \text{Rate Adjustment to 31\% DTI} \]

Where:

Affordable Modification — New monthly payment at 31% DTI
Principal Reduction — Amount of principal reduced to reach target payment
Rate Adjustment — Interest rate adjustment needed to reach target payment
DTI — Debt-to-Income ratio target of 31%

Explanation: The calculator determines what combination of principal reduction and interest rate adjustment would be needed to bring a borrower's mortgage payment to 31% of their gross monthly income.

3. Importance of Affordable Modifications

Details: Mortgage modifications can help prevent foreclosure and keep families in their homes during financial hardship. The 31% DTI target was chosen as it represents an affordable housing cost burden.

4. Using the Calculator

Tips: Enter your current monthly mortgage payment, gross monthly income, current interest rate (as decimal), and remaining loan term in months. The calculator will show what your payment would be under a HAMP modification.

5. Frequently Asked Questions (FAQ)

Q1: What was the HAMP program?
A: HAMP was a federal program (2009-2016) that incentivized lenders to modify mortgages for struggling homeowners to prevent foreclosure.

Q2: Why 31% DTI?
A: Research showed housing costs exceeding 31% of income often led to financial stress and default.

Q3: Did HAMP only adjust interest rates?
A: No, modifications could include rate reductions, term extensions, and sometimes principal forgiveness.

Q4: Is HAMP still available?
A: The original program ended in 2016, but some lenders offer similar modification options.

Q5: How accurate is this calculator?
A: This provides an estimate. Actual modifications involved more complex underwriting and NPV tests.