If you can’t afford your monthly mortgage payment and refinancing is not an option available to you, a loan modification may help you keep your home.
The Obama administration announced a program in March called the Making Home Affordable program that aims to reduce borrowers’ monthly payments to no more than 31% of their pretax income.
To qualify, homeowners must meet a very specific set of circumstances. The homeowners must live in their homes, they can already be behind in their mortgage payments or they have to prove that they stand at the threshold of default because of their financial difficulties, the balance of their first mortgage can’t be in excess of $729,750.00, and their new payments must be made for a three-month trial period in order to qualify.
The savings can be very noticeable for those who qualify. Let’s say a homeowner can’t make the monthly payments of $2,023.00 (excluding taxes & insurance) on their $320,000.00 mortgage. Making Home Affordable could cut that payment to $1,254.00, with a 2% interest rate.
Although the Making Home Affordable program only lasts for just 5 years, each year the loan principal is reduced by $1,000.00 if the homeowner stays current on the payments. When the 5 years is up, the lender will increase the interest rate 1 percentage point a year until it reaches the prevailing rate.
If a homeowner qualifies they must also deal with a lender that is both willing to help and is in the program. Lender participation is voluntary but lenders or loan servicers that handle loans owned or guaranteed by Freddie Mac or Fannie Mae will most likely participate. The names and phone numbers of lenders that have formally announced participation are listed on the Making Home Affordable website.
If you are in need of a loan modification, contact your lender and ask for the loss-mitigation or home-retention department. If they give you the run around, seek help elsewhere.
See More:
MakingHomeAffordable.gov
Loan Modification Program
FDIC Loan Modification Guide
