As part of President Barack Obama's plan to fix the housing market and stop the decline in home values. He dedicated $75 billion for lending institutions and mortgage holders to rework the terms of the most troubled mortgages and to help nearly 3.5 million home owners avoid foreclosure.
1. Monthly Payments It's the belief that home owners can keep their homes, despite the fall in value if they can simply afford the payment.
2. Loan-To-Value Plan requires participating lender to reduce monthly payments to no more than 31% of the borrower's gross monthly income by having the lender meet the 38% level and the govenment would help to get the ratio down to 31%. Then they're to attempt would be to extend the loan term out to 30 to 40 years in attempt to get the monthly payment ratio down, should it be necessary.
3. Incentives To encourage participation, lenders will be paid $1,000 for each modification and will get an additional $1,000 payout each year for up to three years, so long as the borrower continues to make the modified payments. Borrowers, too can receive an incentive of $1000 off their loans principal for up to five years, should they maintain paying the payments.
4. Financial Hardship The plan is designed to help responsible home owners caught up in this financial housing recession. It would be for Owner-Occupied loans of up to $729,750 targeting those with severe hardships caused by things such as loss of income.
5. Net Present Value To determine if a particular mortgage will be modified, the lender will perform a so called net present value test. The test compares the expected cash flow that the loan would generate if it is modified with the expected cash flow it would generate if it isn't. If the modified loan is expected to produce more cash flow for the mortgage holder, the lender is to restructure the loan.
It's important to point out that there are many Scams related to Loan Modifications. Be sure to research what can and can not be done to modify your loan. It's best to begin by contacting your lender first. They should be able to discuss what options are available to you. However, you must do your homework to get a better understanding of Loan Modifications.
You may want to consultant with a Mortgage Specialist in advance to be certain that refinancing isn't an option. You may qualify to refinance your mortgage loan rather than get a modification. Complete the form below and I can help you in determining if refinancing is an option for you.
Contact Hud for more information: http://www.hud.gov/offices/hsg/sfh/nsc/faqlm.cfm
