The U.S. government has some mortgage assistance programs that may help homeowners stay in their homes and avoid foreclosure. Under certain circumstances the mortgage server could be mandated by the Feds to offer one of these programs to qualifying homeowners. If the property owner does not qualify, there may be other legal options available.
Federal Mortgage Loan Modification Program
If a homeowner can't make the monthly mortgage payment due to a documented financial hardship, they mail qualify for the Home Affordable Modification Program (HAMP). If Fannie May or Freddie Mac guarantees a property mortgage, the mortgage server (lender) is mandated by the federal government to modify loans to qualifying homeowners. Even if a home loan isn't guaranteed by Fannie May or Freddie Mac, some mortgage servers have volunteered to help those that qualify.
HAMP Loan Modification Rules and Guidelines
Under HAMP, the mortgage server has to modify the loan to an interest rate as low as 2% per year and a term of 30 years. The lender does not have to go below 2% and is not required to extend the loan past 30 years. The homeowner(s) monthly gross income must be greater than 31% of the modified loans total monthly payments (including property tax and insurance). The mortgage server is not mandated to reduce the principle amount.
The following steps will help the homeowner figure out if they qualify for the federal loan modification program or HAMP.
- Use a mortgage calculator to figure the monthly payment on a 2%, 30 year fixed loan on the existing principal balance.
- Add applicable property taxes and homeowners insurance to the monthly payments.
- Divide the monthly payment into 31%.
- The amount of the homeowner(s) monthly gross income (not take home) must be greater than this amount.
As an example, if the monthly payment is reduced to $1,000 (with property taxes and insurance added) with a 2% loan, the homeowner(s) monthly gross income must be above $3,225. If the monthly gross income is higher, the lender may opt to increase the interest rate above 2%.
Options for Homeowners Unable to Qualify for HAMP
Lending institutions will normally do what's in their best interest or what the law mandates. If a homeowner does not qualify for HAMP, the mortgage server will usually take a course of action that's in their best interest. If they feel it's financially beneficial to foreclose on the property instead of reducing the principle or extend the loan past 30 years, they will probably foreclose on the property.
Seeking the advise of an attorney, that specializes in foreclosure proceedings, may be the only option that can save a home from foreclosure. Be careful of anyone that asks the homeowner to pay a fee upfront to modify a loan. Never sign the deed over to anyone that claims they can save the home. For further assistance, contact the advise of a qualified attorney at www.usloanz.com/loan-modification-quote.php
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