Have you heard about Obama's Loan Modification Plan? The program is meant to help Americans who are struggling to cover their mortgages by securing payment schedules that are more manageable with their current situations.
Definition of Loan Modification:
Simply put, a loan modification is a process in which the terms of a loan are altered with the approval of the lender. These terms can include the interest rate, length of the loan, reduction of late fees and penalties, and/or capping the monthly payment to a percentage of household income. These terms can be temporary or permanent depending on what the borrower is able to work out with their lender.
Qualifications:
- A borrower may only seek a loan modification on their primary residence. Investment properties do not qualify.
- There is a limit on the principal balance of $729,750.
- A borrower must be able to prove that their mortgage is causing them hardship and putting them in a position where they are at risk of defaulting on their loan.
- Only loans originated on or before January 1, 2009 are eligible.
Key Facts:
- A borrower may be current, late, in default, in bankruptcy, or in foreclosure at the time they apply for the modification.
- This plan requires participating loan servicers to lower monthly payments to no more than 38% of the borrowers gross monthly income. After that, the government would give additional funds to help lower the payment further to no more than 31% of the borrower’s gross monthly income.
- Lowering the payment to 31% would include a drastic reduction of interest rate (as low as 2%) as well as a possible extension of the terms of the loan for up to 40 years.
Caveats:
- Always contact your lender first with an honest account of your hardship. When you call, ask for the Loss Mitigation department and take detailed notes of everyone you speak to, dates and times you called.
- Any company offering to negotiate a loan modification for you for a fee is most likely a scam. There are non-profit counselors approved by the Department of Housing and Urban Development that will help borrowers for free (see link below for HUD's FAQ page)
Resources:
An excellent fact sheet from the Department of Treasury can be found here: http://www.treas.gov/initiatives/eesa/homeowner-affordability-plan/FactSheet.pdf
Another great site is HUD's frequently asked questions page: http://www.hud.gov/offices/hsg/sfh/nsc/faqlm.cfm
Posted at 11:14AM Feb 02, 2010 by Bob Billimack in Financing Comments[2]
Posted by Loan Modification on February 10, 2010 at 12:38 AM CST #
I didn't know about the modification.
thanks for letting me know.
It is really useful for me.
.........
johnrock
http://www.yourquickmortgage.com " "dofollow" Compare Mortgages
Posted by johnrock on February 19, 2010 at 12:53 AM CST #