For people who are having problems keeping up with payments or trying to refinance their home for lower mortgage payments to avoid foreclosure, there is help on the way. A loan modification program helps those who are in default of 30 days or more, and those who cannot refinance due to decline in housing values and credit tightening.
The state of the economy has hit hard and in the process has taken businesses and jobs with it. Home values have fallen, paychecks don’t go as far, and all of this has lead to homeowners not being able to pay their mortgages. As a result, many are now facing foreclosure.
In fact, there are a large number of people who already owe quite a bit more than the home is currently worth. The problem is compounded by homeowners who are selling below appraised values to get out from under mortgages they can no longer afford.
Some claim that a loan modification is the answer, but this information can be confusing. To make it easier, there are companies that you can consult who can help with the loan modification process. Homeowners can obtain a free consultation from a modification specialist who will be able to determine the modification program that is best for their needs, without all the confusion.
There is a catch to the loan modification program: simply that there can only be one modification during the life of the loan. So it needs to be handled in the right way. For homeowners more than a month behind, quick action is needed in order to complete the modification process.
What the modification program does is get the homeowner’s mortgage payment, including interest, taxes, insurance and any other fees, reduced so that the payment is not more than 31% of the homeowner’s gross monthly income. To do this the loan modification companies work with your lender to adjust the mortgage interest rate, the terms of the loan and the principal amount owed.
With interest rates as low as 2% per year and terms as long as 40 years, principal reductions come by a delay in a portion of the principal or by forgiveness of part of it. But the reduced principal amount cannot be lower than the value of the home.
However, lenders are not required to take part in the loan modification program. To encourage their participation, the government is offering incentives to these companies. For example, for every year that a borrower remains in the program, the government will give the lender $1000 for up to 3 years. Then of course there is an incentive for the borrowers as well to stay in the program, the government will give an additional $1000 to the borrower by applying it directly to the principal of their loan over a 5 year period.
Even borrowers who are in foreclosure or bankruptcy may be eligible, although the court may order the loan modification, in the case of bankruptcy.
The loan modification program is an opportunity that should be taken advantage of by borrowers who are facing eminent problems with meeting their mortgage obligations or who are already in trouble. Borrowers should speak with a professional in order to make the process easier and to get the correct mortgage reduction for their needs.