New Program for Homeowner's Facing Real Estate Foreclosure

Making Home Affordable program was introduced by President Obama to help as many as 7 million to 9 million homeowners facing foreclosure. Homeowners could opt for loan modification so that the existing terms of their mortgage are altered enabling them to make their mortgage payments in a more affordable manner. 
The mortgage bailout plan was made available to homeowners having a good payment history and for those who had availed loan from Fannie Mae and Freddie Mac. However, the program failed to address the needs of many homeowners as not all homeowners qualified for the same. The mortgage bailout program had very stringent qualifying factors and it failed to meet the needs of homeowners having second mortgages. 

Loan modification has certain salient features and the prominent ones are enumerated below –

If you have taken out a mortgage that originated prior to January 1st 2009, you can avail loan modification.
 
Loan modification can take place until December 31st 2012 and you can get your mortgage modified only once of you are found to be eligible for the program.
 
For modifying loans, lenders usually get incentive from the government. This applies to lenders who are willing to modify loan terms of homeowners who are on the verge of default.
 
Lenders willing to modify mortgages are required to make use of NPV or net present value on mortgage loans that are likely to become delinquent or have already fallen behind on payments for the last 60 days. The NPV helps the lenders to calculate the value of cash flow without loan modification as well as with loan modification. In case the NPV of the cash flow is more than the value of loan modification, the lender is required to modify “contract prohibition” or “absent fraud”.
 
Lenders are required to adopt a step wise approach to reduce the monthly mortgage payments that shouldn’t exceed 31% of the gross monthly income.
 
The sequence of loan modification involves the following steps – reducing the interest rate, extending the term of the loan if required. A lender can also reduce the principal amount in certain cases.
 
The guidelines are quite stringent and this was one of the probable reasons why majority of the homeowners didn’t qualify for loan modification program. However, in order to do away with the drawbacks of this mortgage bailout plan, Obama introduced the foreclosure program that is an expansion of the making home affordable plan and was meant for homeowners having second mortgages. This new program is expected to do away with the drawbacks that exist in case of the first mortgage bailout program.  
 

Article submitted by Sandy Thompson: http://www.mortgagefit.com/know-how/loan-modification.html    

FREE REPORT: 10 Steps in Choosing a Kansas City Real Estate Agent

 Bookmark this page: Bookmark on del.icio.us  Bookmark on Digg  Bookmark on Furl  
       Bookmark on Google  Bookmark on Netscape  Bookmark on Stumbleupon  Bookmark on Yahoo MyWeb

Visit the Dowell Taggart Team all over the web, including: