Loan Modification - Making Home Affordable Program

A vast majority of mortgage holders wish they could lower their monthly mortgage payment, either to increase cash flow or to avoid foreclosure. Refinancing and loan modification offer two great ways to lower a monthly mortgage payment. Refinancing involves receiving a brand new mortgage with a lower interest rate. Loan modification involves modifying the existing mortgage to make monthly payments more affordable. Loan modifications are easier and faster to receive than refinancing, which requires more paperwork and a higher credit score.

A Temporary Solution?
While people see refinancing as a permanent solution, loan modification often only temporarily lowers mortgage payments. After five years, the rate of a modified loan may slowly rise to a preset maximum level. If you choose to modify your loan, be sure to speak with your lender about this preset maximum rate.

Making Home Affordable Loan Modification
Loan modification helps homeowners facing foreclosure to lower their monthly mortgage payments and remain in their home. The Obama Administration’s new program, Making Home Affordable, helps to reduce mortgage payments for eligible homeowners. Loan modification applicants must show a significant need for a lower monthly mortgage payment. To be eligible, homeowners can be current on their loan but struggling to make the payments, or they may have already missed one or more payments.

Improving the Process
This past week, the Department of Housing and Urban Development (HUD) sent letters to 25 banks, asking them to do more to help homeowners in financial peril. HUD asked the banks to increase staff and resources to help make it easier for people to receive a loan modification. To date, an estimated 175,000 loan modifications have been awarded under the Making Home Affordable program. The goal, however, is to help up to 4 million homeowners. In order to achieve their goal and make loan modification available to more people, the government recently raised the loan-to-value eligibility requirement from 105% to 125%. This means that homeowners whose mortgages are up to 125% of the value of their home can now receive a loan modification.

HUD now urges lenders to complete the loan modification process more speedily and efficiently, and to also help homeowners understand the ins and outs of loan modification. The more knowledgeable the homeowner, the better they’ll be able to understand and handle their personal finances. The government will begin evaluating each lender’s efforts and offer incentives for banks that help to improve and quicken the loan modification process.


Publish Date: 2009-07-12 16:02:13

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