Sunday, 24 July 2011

Mortgage Rescue Plan: Using Obama's Home Loan Modification to Keep Your House

By John Roney


Effective immediately, homeowners in danger of foreclosure have a new way out. Until the end of the year 2012, Obama's home loan modification plan is in full swing. The loan modification project is part of the Making Home Affordable plan, and collectively the mortgage rescue plan will save up to 9 million homes from foreclosure nationwide. Everyone knows that the economy is in a difficult situation right now. The current recession has encouraged a dangerous spiral of layoffs and wage reductions at work, which in turn leads to foreclosures and delinquent loan payments at home. That's why foreclosures have skyrocket in number, and property values have plummeted.

One foreclosure can affect the prices of all the homes in a neighborhood. One study estimates that a home can lose up to 9% of its value when a neighboring home is foreclosed. Therefore, not only people who directly experience foreclosure are affected. Many often owe more on their mortgages than their home is worth, and others are in danger of foreclosure. The President's Making Home Affordable plan gives two broad options to citizens with home loans that find themselves in financial crisis mode. Concerned homeowners are asked to speak with a HUD-approved financial counselor for no charge. With the counselor's help, they go over their financial portfolio and may be directed to a Hope for Homeowners refinance. These refinances have special rules that accommodate many more people than old rules used to.

You do not have to be delinquent on your home loan to apply and qualify, but you must be able to demonstrate that you are at imminent risk of becoming late and are facing a hardship. The lender will ask you for a financial statement that details your current income, expenses, and assets. Based on the information you provide, they will then use a standard formula to determine if you meet the approval guidelines.
If you have a hardship on your home loan, then it makes sense to learn the very same formula your lender will use to determine if you qualify for help.

The money in this initiative goes to pay financial incentives of $1,000 to lenders and borrowers who participate in the program. If the lender deems that a modified loan with incentive payments is more profitable for them than foreclosure, the loan is modified. There will be a three-month trial period for modified loans. For the next 90 days, the borrower pays on the new modified monthly premiums, and if that is done successfully the modified loan terms stay in effect for the next five years.

Unfortunately, if there is no visible evidence of you being able to get back on track, then chances are you will be "out of luck". For example, if your expenses exceed your income with no visible evidence of this changing then in most cases foreclosure will be inevitable. While mortgage refinancing can offer a chance for you to survive, it is ultimately up to the lending institution as to whether you will qualify. So while mortgage modifications may seem to be the "hero" you will need to help you survive, a typical mortgage modification will not help everyone.




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