The Obama loan modification plan will offer a second chance for millions of homeowners stuck in unaffordable home loans. The standardized plan is called Home Affordable Modification, or HAMP for short, it seeks to offer a way out of foreclosure for qualified homeowners. Participating lenders will be given monetary incentives to offer the plan to interested homeowners, however each application will be reviewed and a determination made on a case by case basis. Learn more about how it works to find out if you might qualify for help.
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Top 10 Questions on the Obama loan modification plan:
#1: Do I have to be late on my mortgage to qualify? No, the program is aimed at preventing foreclosures for all homeowners facing a financial hardship now or in the future. Lenders and servicers actually get paid more to modify loans that are not yet delinquent. You must pass an "imminent risk of default" calculation in order to be eligible. Do you know how to calculate this approval trigger?
#2: How do I know if my loan is eligible? If your loan amount is $729,750 or less and was originated before January 1, 2009 if will probably be included in the Obama loan modification plan. (higher loan amounts allowed for 2-4 unit properties)
#3: I own a duplex, and live in one of the units-can I apply? Yes, as long as it is your principal residence. Investment, second homes or rental properties are not included in the program.
#4: My current mortgage payment is unaffordable, how low can my modified payment be with this loan modification program? The plan seeks to lower the monthly mortgage obligation (including taxes, insurance and HOA dues) to equal 31% of your gross monthly income. If your current payment equals more than 31% of your gross, you may qualify for a lower payment. Get help to compute your target payment with the Loan Mod Quick App software-it does all the calculations for you automatically.
#5: Will this loan modification plan apply to my second mortgage too? Yes, the program has been expanded to include second loans as well. THe modification method include lowering the interest rate to 1% or forgiving some principal balance. The Treasury Department is subsidizing banks at 12 cents on the dollar.
#6: Does my lender have to give me this loan modification plan? No, it is a voluntary program. Most lenders and servicers are expected to participate however because of the generous incentives offered by the Treasury Department. In addition, if you are 60 days delinquent or more and your bank is a participant, they are required to evaluate your loan to see if you might qualify.
#7: How will my lender lower my payment to reach the 31% debt ratio guideline? First, the interest rate will be reduced to as low as 2%, if the ratio is still too high, then the term will be extended to 40 years. If still more is needed, then a portion of the principal balance may be deferred (interest free-but payable if the home is sold or refinanced)
#8: How do I know if my bank is participating? You can call your lender or servicer or visit the government website-homeaffordable.gov.
#9: What paperwork will I have to provide to apply for the Obama loan modification plan? You will be asked to prepare an accounting of your income and expenses (financial statements), document a hardship situation, provide your paycheck stubs, current bank statements and tax return. The information you provide on your financial statements can have a big impact on whether you will be approved or not, so make sure you know how to complete that correctly. Take the confusion and frustration out of preparing your financial statement when you use the Loan Mod Quick App software.
#10: What is the cost of this loan modification program? The plan is free-there is no charge to apply or qualify. The Treasury Department is warning homeowners against paying any large upfront fees to anyone.
This information is the basic outline of who may qualify, but borrowers are encouraged to take some time to learn more about how to prepare your application properly to increase your chances of success. The program uses a 4 step method to determine who qualifies. You can learn this very same formula and use it to prepare your own acceptable modification proposal. Don't miss out on your chance to lower your monthly mortgage payment.
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