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Mortgage Loan Modification

If you have become overextended with your monthly mortgage payments and you are thinking what to do, there is a solution for you. You can opt for a mortgage loan modification program to eliminate your mortgage loan problems for good.

About mortgage loan modification

On March 4, 2009, U.S. President Barack Obama declared his strategy to help the U.S. real estate market. The strategy comprises two constituents: mortgage refinance and mortgage loan modification. We will discuss about mortgage loan modification here.

Approximately 9 million homeowners in the U.S. will be benefited by the Making Home Affordable Plan. There are various eligibility prerequisites and not every homeowner will gain from the plan. Irrespective of the direct intervention of the federal government, it is better for a homeowner to look for professional guidance for handling home loan difficulties.

Credit card reforms and mortgage relief programs have been planned to directly take care of consumer problems resulting from the most recent economic slump.

What is mortgage loan modification?

Mortgage loan modification is not similar to mortgage refinance. Mortgage modification is not a new loan rather it is a variation in the terms and conditions of a mortgage loan. The federal government is offering bonuses to lenders to take part in loan modification programs and also to homeowners to stay up to date on a modified mortgage loan.

What are the features of mortgage loan modification?

Given below are the important features of the mortgage loan modification program introduced by President Obama:

  1. The government will be sharing the expenses of a mortgage loan modification with the lender for a modification program which reduces the borrower’s cost to lower than 38% of his gross income down to 31% of his gross income
  2. The lender will get a payment of up to $1,500 for an approved mortgage loan modification
  3. The whole government funding for the program might accumulate to $10,500 each home
  4. The borrower will get $1,000 every year for a maximum period of 5 years for staying updated on the loan

Eligibility criteria for Obama’s home loan modification program

Given below are the eligibility criteria for Obama’s home loan modification program:

  1. The loan has to be regulated by Fannie Mae or Freddie Mac
  2. The home should be the primary residence of the owner
  3. The mortgage should be originated earlier than January 1, 2009
  4. The loan should have an outstanding balance that is equivalent to or lower than $729,750 (if it is a single-family residence)
  5. Mortgage problems should be attributable to financial hardship. This financial hardship might have arisen from a rise in the monthly payments, or a reduction in the income of the borrower or there were unforeseen events (health concerns or wage cuts) that raised the expenses of the owner to such an extent so that the owner shortly will not be able to make the payments. There is a necessity to file an official declaration of financial hardship.
  6. The monthly mortgage loan payment has to be higher than 38% of the gross monthly income (before tax) of the owner. (This is termed as the debt to income ratio or DTI.)

You should remember that all properties and home loans are not eligible for loan modification programs. You must research thoroughly to find out whether you are eligible for home loan modification or not.

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