From the beginning, a lack of proper instructions hindered the success of HAMP. Once the government audited the program, they found that "thousands" of applicants were wrongly denied the opportunity to refinance their mortgages.

Although the lenders participating in the program have improved their communication regarding the loan refinancing approval process, there are other consideration homeowners need to ponder before proceeding:

• Employment Status: If you are fortunate enough to have a job right now, you can indeed apply for the program. The unemployed need to find assistance elsewhere.
• Adjustable Rate Mortgage Loans: Qualified borrowers will end up with a low interest rate for a period of five years, after that the rates will increase based on market conditions.
• No Debt Reduction: This program is not intended to assist underwater mortgage holders, as it does nothing to reduce the principal mortgage balance due.
• Credit History Damage: HAMP does nothing to help your credit score as lenders are reporting the trial modifications to credit bureaus as partial payments resulting in lower credit scores.

How to Make HAMP Work For You

Despite the shortcomings, HAMP is a tangible way for homeowners to get help. The program offers help specific to four, common situations:

• Home Affordable Refinancing: Provides refinancing opportunities for borrowers with Fannie Mae or Freddie Mac mortgages.
• Home Affordable Modification: Refinances current mortgage rates with lower interest options.
• Second Lien Modification Program (2MP): Dual property owners who refinanced their primary residence under HAMP can also get lower payments on their second mortgage.
• Home Affordable Foreclosure Alternative: Provides $3,000 for new housing expenses for underwater mortgage holders who choose to complete a short sale or deed-in-lieu.

In order to make any of the HAMP alternatives work for you, borrowers must be committed to changing bad money habits and paying off all debt. The Fitch Ratings report indicates that the majority of HAMP modification defaults will be caused by consumers who do nothing to change the behavior that got them in trouble in the first place.