home loan modification

It is good news for millions of home mortgagors! President Obama has announced a plan for Home loan modification with not less than 75 billion dollars for refinancing or modification of home loans! This is part of the Tarp I plan worth $700 billion announced in late 2008. Under this scheme, called the “Making Homes Affordable” program help is available not only to the people who have defaulted in payment of home loans and face foreclosures. The mortgagees who have never missed a payment are also benefited by the home loan modification plan. Both these categories of people can now renegotiate with the creditor for a lower interest rate under the new “Making Home Affordable” plan. The mortgagee can now heave a sigh of relief that the money he or she has invested in the hope of owning a house of his/her own is not lost.

The home loan modification plan is for the people who cannot afford to pay the monthly payments. The home loan refinancing plan is meant for the people who make the monthly payments on time. Such people can negotiate for a lower rate of interest. Borrowers, lenders and the service providers are all given incentives and subsidies under the Making Homes Affordable program. Over nine million people of the United States of America are benefited by the scheme.

Home loan modification is actually for the people who find it difficult to pay the monthly mortgages. There are several reasons for their inability to pay up. The income of the mortgagees might have come down. Or the interest rate might have been raised by the lender. In both cases the borrowers cannot pay up mortgages. The home loan modification plan gives incentive to lenders and service providers so that they can bring down home loan payments to 31% of the borrower’s income. In the loan modification plan the length of time given for repayment is extended to keep the monthly payments within affordable limits. The interest rate is also reduced, so that the total liability of the borrower is reduced to a significant extend. The lender also may be interested in reducing the liability of the borrower because the cost is much less to him than when the borrower never pays at all.

There are certain conditions for availing the benefits of the home loan modification scheme. The first is that the property in question must be the primary residence of the borrower. The second condition is that the amount owed on first mortgage should be $729,750 or less. The borrower must have genuine difficulty for payment of the mortgage to qualify for the home lone modification. Genuine difficulty means the borrower’s inability to pay due to hardships like increased medical bill, reduced income or a considerable increase in the monthly mortgage payments. The monthly payment due on the first mortgage must be more than 31% of the gross income of the borrower. The gross income is calculated before tax and adjustments. The mortgage dues include principal, interest, taxes, insurance and home owner’s association dues. The mortgage in question must have been obtained before January 1, 2009.