Government program helps
Hang on to your house through the federal foreclosure prevention plan.
The federal government launched its foreclosure prevention plan in March, and since then Chase Morgan, the servicing side of JP Morgan Chase, alone has modified 15,000 loans.
One man from Ohio had his payments lowered from $1,200 per month to $725 per month, according to CNN Money.
Who is mortgage loan modification for?
The government started this program to keep homeowners from losing their homes. The loan modification program can help people who have fallen behind on their mortgages as well as Fannie Mae and Freddie Mac mortgage holders who have kept up with payments but are struggling.
To qualify, borrowers must show proof of hardship and meet these criteria:
- obtained their mortgage before Jan. 1, 2009;
- have a primary mortgage of less than $729,500;
- live in the property;
- fully document their income by providing tax returns and pay stubs;
- sign a statement of financial hardship; and
- go for counseling if their total household debt – including auto loans, credit cards and alimony – totals more than 55 percent of their income.
Getting started
A great way to get started on the road to mortgage loan modification is to go to the government’s web site, makinghomeaffordable.gov. You can take a quiz to make sure you are eligible for the program.
The government intends for the program to help between 4 million and 5 million homeowners, so there are still plenty of loan modifications to go around. The government has dedicated $75 billion to helping struggling homeowners get loan modification.
How loan modification works
Under this new program, loan modification services must reduce interest rates so borrowers’ mortgage payments are 38 percent of their monthly income. However, the interest rate cannot fall below 2 percent.
The government will use the $75 billion fund to pay an amount that reduces the mortgage holders out-of-pocket expense to 31 percent of their income per month.
Future of modified loans
New interest rates will be in place for five years. After that, the interest rate will go up 1 percent each year until it reaches either the original interest rate or the prevailing mortgage rate at the time of the modification, whichever is lower.
If a lower interest rate doesn’t bring payments down far enough, lenders will extend the term up to 40 years or shift part of the principal to the end of the loan at no interest. Servicers can also reduce the loan’s balance.
Seek help
If you’d like to get in touch with a loan modification expert, check out my article 5 Things You Should Know About Mortgage Loan Modification, and fill out the form at the bottom. We will get you in contact with a qualified, professional financial expert who can make the loan modification process a snap for you.
A mortgage loan modification expert will also make sure that there are no paperwork mistakes, help negotiate the very best terms for you and assess your overall financial situation to determine the best long-term solution to your financial needs.
