Aug 27 2009
Mortgage Loan Modification Plan
The Mortgage Loan Modification Plan is a new Federal program designed to help qualified homeowners reduce their monthly payments. Many banks and other mortgage lenders are participating in this plan, and over seventy billion dollars have been allocated by the government for funding.
If you meet some basic criteria, you are eligible for a significant reduction to your monthly payments. This standardized program means no negotiations are necessary: if you qualify, your application will be processed.
First, make sure your bank or mortgage lender is participating in the program, since it is voluntary and there is no guarantee all lenders will join. Participating loan companies will receive payment for each modified loan completed as an incentive to do their part, so chances are good your lender has elected to participate. Some participating lenders include Bank of America, Wells Fargo, Countrywide, and GMAC.
Second, determine if you qualify to apply. The criteria:
1. The mortgage is on your primary residence
2. The current loan payment (including taxes, insurance, and dues) is 31% or more of your gross monthly income
3. You have a financial hardship situation, such as risking losing your home
4. Your loan amount must be under $729,750 for a single-family residence (multi-family residences have higher amounts)
5. The mortgage was taken out before the first of January, 2009
When preparing your application be sure to keep the criteria in mind. These are the guidelines that determine eligibility for the mortgage loan modification program.
The Loan Modification program is not just for first or primary loans. Second liens or mortgages can still be eligible. Homeowners that have suffered the loss of equity due to a second mortgage might be able to reduce the interest rate as low as 1%, or even have the entire debt eliminated. Participating lenders can be paid to forgive secondary liens that qualify under this plan, just as with primary loans. . If you have a second mortgage, ask your lender about this option.
Qualified mortgage loans will be adjusted to reduce monthly payments to no more than 31% of your gross monthly income. In general, the following changes will be enacted:
1. Interest Rate Reduction: as low as 2%
2. Term: extended up to 40 years as necessary to lower monthly payment amount
3. Principal: some might qualify for deferral
Also, borrowers who stay on track with their new payments can receive a bonus with this program. Over five years, homeowners can get up to $5000 to reduce the principal balance of the mortgage and increase their equity.
The mortgage loan modification program can mean the difference between keeping your home or losing it due to financial hardship. The application process is straightforward and all qualified homeowners are encouraged to apply. Talk with your lender as soon as possible to ensure your application gets processed before the funding is gone.
