New Home Mortgage Loan Modifications Reduce Homeowner Worries
While the economic downturn has hit many homeowners hard, the President's home mortgage loan modifications program is here to restructure many mortgages. This is a cause for many to celebrate their good fortune.
The Making Home Affordable loan modification program was enacted on March 4, 2009. There are two parts to the restructuring. First, it allows 4 to 5 million borrowers to qualify for refinancing. Second, it creates more permissive guidelines for home loan modifications.
Countless Americans, stressed by the current economic realities, face foreclosure or increased problems in meeting the terms of their mortgage. An increasing number of Americans are laid off, are suffering cuts in pay, and so forth, as their total percentage of income needed to make monthly payments increases beyond the point of reasonableness. The new plan grants qualifying homeowners loan modifications that cut their mortgage to 31% of gross monthly income.
Reduced mortgage payments are to be held at the reduced rate for at least five years. At that time, the mortgage payment may be raised incrementally to the loan rate in place when the loan was modified. Homeowners need not be behind in their monthly mortgage payments to be eligible.
Mortgage borrowers who use the plan receive an extra incentive as well. Each timely payment means they receive relief from the balance due on their principal. Thus, a borrower who meets the mortgage for 60 months is eligible for up to $1,000 per year. Likewise, lending institutions receive incentive payments for modifying their existing loans.
Not all mortgage loans are eligible. Qualifying loans are for owner-occupied homes. Thus, no short-term investors or speculators will qualify. Also, the borrower needs to supply gross income documentation, and the loan must have originated prior to 2009. Each qualifying borrower is only eligible once. The deadline for loan modification is 12/31/2012. And finally, this plan provides relief only to borrowers with loand covered by Fannie Mae and Freddie Mac.
