Home Loan Modification Programs – Get Help People with Their Home Loan
parag | FHA Mortgage, Loan Modification, Modify Mortgage | August 31st, 2010 | No Comments »
The Obama administration recently announced its loan modification programs to help homeowners who are overwhelmed with their current housing obligations and need Loan Modification Help.
They’re targeting two separate classes of homeowners: Those who are paying their mortgage faithfully who would like to do a loan modification that is really a refinance but can’t because the value of their home has fallen below federally-mandated thresholds. These homeowners are generally able to make their mortgage payments; the measure is designed to provide some relief.
The second class is those homeowners who in dire financial straits and cannot make their mortgage payment at all. These folks will be eligible to enter a loan modification plan.
Loan Refinancing
This is pretty straight forward. This targets borrowers with solid payments histories whose mortgages are owned or guaranteed by Fannie Mae or Freddie Mac. Currently, homeowners with a loan to value ratio of 80% or less can’t refinance, so they’re unable to take advantage of rates that have fallen drastically over the past year.
The proposal relaxes this rule by allowing lenders to provide loan modification help by a refinance these loans even if the loan-to-value ratio has increased to 105% because of plummeting real estate values.
Loan Modification
To be eligible for this, borrowers must prove they don’t have enough assets to make their mortgage payments. By doing so, they’re eligible for several measures to lower their monthly payments.
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Mortgages that are eligible must have been originated on or before Jan. 1, 2009, and are owner-occupied and primary residences for the owner. Home loans above $729,000 are not eligible.
Borrowers currently going through bankruptcy proceedings are not automatically eliminated from a loan modification. While the homeowner is seeking loan medication help, any foreclosure proceedings are temporarily suspended.
To make the loan modification programs more palatable for mortgage lenders (and mortgage services), the government is essentially sharing the costs of loan modification.
The lender must reduce payments to 38% of the borrower’s monthly income through reducing the interest rate, extending the terms of the loan, or other means. After that, the U.S. will match dollar-for-dollar any further reductions that bring payments down to 31% of the borrower’s monthly income.
Loan services who modify loans will receive a $1,000 up-front fee for each loan modification and a $1,000 annual fee for each home loan that’s still performing.
Homeowners making loan modification payments on time receive a $1,000 reduction in their loan principal each year, up to $5,000.
Lenders and investors will be rewarded for each successful loan modification over time: They will receive a one-time bonus of $1,500 for each loan modification before borrowers miss any payments. Services get a $500 bonus on these loans.
