Obama's Loan Modification Plan is supposed to help homeowners to afford their monthly mortgage payments by refinancing the current mortgages or by having their loans modified in some way. This plan would include help for homeowners who are not currently in default but are in some ways at risk of failing behind in their mortgages payments or are at risk of default.
Unfortunately the vast majority of the funds will go to the banks and lenders with the objective of incentive them to participate in this program, but they will not be forced to comply.
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Very important as well, Obama's Loan Modification Plan will fight to amend the law to help homeowners with could not afford, even new modified mortgage payments to get help under a new possible bankruptcy law.
Obama's Loan Modification Plan is a voluntary program for the banks and lenders. It includes big incentives for mortgage servicers and investors, both of whom have been seen as unwilling to work with homeowners facing foreclosure to modifying loans.
These funds will try to subsidize rates and insurance companies with falling home prices, and millions more will be used to modified loans of those homeowners who already are in default in their mortgage payments. The plan would help homeowners who owe more than 80% of the value of their homes to refinance and reduce their monthly mortgage payments. Banks and servicers normally won't refinance loans to people who have less than 20% equity in their houses.
At this moment, only those who are current on their payments and whose loans are held or guaranteed by Fannie Mae and Freddie Mac are eligible for the Obama's Loan Modification Plan. This only, is leaving millions of homeowners facing foreclosure out of the scope.
The new refinanced mortgage, including refinancing costs and expenses, can not exceed 105 of the current value of the home, excluding many of the hardest places hit. So if your loan is $210,000, your home can not be worth less than $200,000 in order to be considered for the plan, this is one of the reason thousands if not millions of borrowers are being rejected.
Obama's Loan Modification Plan, which started March 4, allows borrowers to refinance into 15-year or 30-year fixed-rate mortgages at the current market rate, which lingers around 5% at this moment, this intent to help homeowners loan that carries higher rates and those whose rates could be increased in the future because of the adjustable mortgage rate that they signed on. The loan balance, however, will not reduce.
Obama's Loan Modification Plan would reduce interest rates so that the monthly obligation is no more than 38% of a homeowner's income and then the government would kick in money to bring payments down to 31% of the borrower's income.
The initial objective of the plan is to bring monthly mortgage payments to 31% or less of the homeowner's income. Only loans where the cost of the foreclosure would be higher than the cost of modification would qualify, and this, unfortunately, is determine by each Lender.
Obama's Loan Modification Plan also addresses some borrowers who need extra help because they are carrying so much debt on top of their mortgages. Those with total debt equal to 55% of their monthly income must enter a debt counseling program to qualify for a modification.
Part of the Obama's Loan Modification Plan is that it does not powerfully address the fact that over 14 million homeowners are stuck in mortgage loans that have balances that are higher than the value of their homes. These homeowners will not qualify for the plan.
If a family has a setback, like unemployment, reduced household income or illness, will not be consider for this modification plan. For properties that have not equity, default and foreclosure may be impossible to avoid. Similarly, if the family has a big expense for a new roof or new plumbing, etc., it would not make sense to put more money into a home in which they have no equity. In those cases Obama's Loan Modification Plan will not be a solution for the homeowner.
Fortunately, there are still ways you can stay in your property for a very long time, often more than two years, even if you were rejected into the Obama's Loan Modification Plan or if you think you will not qualify at this time because of the many requirements necessary to be considered for the program. Even if you lost your job, or have not income whatsoever, you still can stay in your home, but you need to know what to do and how to proceed in order to achieve this.
You do not have to lose your home just because you did not qualify into any of the government Loan Modification or refinance program, you still have many options, but just sit in your home and wait for foreclosure will not do it, you need to act and you need to act fast.
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