Modifying Loans on Rental and Commercial Property
Under HAMP Tier 2, the Making Home Affordable program was extended to cover one to four unit residential rental properties. HAMP Tier 2 went into effect June 1, 2012.
The government realized that foreclosing on a rental property was just as destructive of home values and homes as foreclosing on an owner occupied property.
There is an limit on how many rental properties one can modify under HAMP 2, three rental properties. To be eligible for modification under HAMP 2, the loan must have been originated before January 1, 2009. The property must not be vacant.
Commercial property is defined as residential properties of five units or more or non-residential properties such as business and commercial buildings.
Although commercial loans cannot be modified under Making Home Affordable, they can be modified if the right circumstances are present.
If a property is “under water”, that is if the property is worth significantly less than what is owing on the mortgage, and/or if the market is weak in the relevant area, and/or if the owner is in serious default.
A lender will modify if the lender will lose less money by modifying than the lender will lose by not modifying.
When it comes to commercial property, modifications are called “workouts”, not “modifications”.