Loan Modification: Navigating The New Program Is Easier Than You Think
There is a new loan modification program in place that is geared toward both the soon to be struggling homeowner and the homeowner perilously close to foreclosure. Set in motion with 75 billion of the bailout money approved by the previous presidential administration, this plan seeks to keep people in their homes and keep their mortgages viable. It bails out both banks and borrowers at the same time.
The first part of this program is called Making Home Affordable and seeks out the homeowner who has not yet missed any payments but could soon face severe difficulty keeping up with their bills. Their loans are modified in two ways, lowering interest rates and lowering principal amount. Their remaining loan is also spread out over a longer period of time. This keeps the homeowner successfully meeting their mortgage commitment and keeps the bank earning interest from the loan. These modifications may only be in place for a set amount of time and then the loan would revert back to its original terms.
The other part of the program is called Home Affordable Modification and seeks out homeowners who are already missing payments and defaulting on their mortgages. This plan modifies the monthly payment amount so that it is not greater than 31% of the home owners’ gross monthly income. Often times this is accomplished by lowering interest rates and writing loans over a 40 or 50 year payback schedule. These changes can also be temporary but would not be changed back until the homeowner was in a secure financial position.
You as a homeowner can access information on this and other loan modification programs at your local bank or online. A simple keyword search will connect you to hours of reading. Paying a visit to www.financialstablilty.gov will connect you to loan modification programs funded by the federal government.
Although the economy is poor shape and will likely get worse before it gets better, this loan modification program could be a key step in getting people buying homes, refinancing their mortgages and stay current with the loans they have. Once the banks feel more confident in their ability to trust borrowers they will lend more freely. Once the foreclosure rate slows down confidence will return to the housing market.
Regardless of your current financial situation checking out loan modification is a good move. Knowledge is power and in this economy you need all the power you can get!
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