The final aim of loan modification program is to modify mortgage terms. One should fulfill the eligibility criteria and qualify to avail the loan modification program. Obama's home loan modification plan is like the twilight at the end of the tunnel. One has to qualify to avail the facilities of this plan. Some of the terms and conditions to qualify for this mortgage loan modification plan are as follows:
- The current mortgage should be insured by either Fannie Mae or Freddie Mac.
- The home for which the home loan modification plan is being sought should be the primary residence of the applicant. If the house is being used for some other purpose, the application for the loan modification plan is going to be rejected.
- The applicant should have received the current loan or mortgage before the 1st of January, 2009
- The amount of the first mortgage or loan should be equal to or less than $729,750.
- The monthly payment required to service the first mortgage should be more than 31% of the annual income.
- One should be regular at filing the income tax returns. If the applicant is found to be irregular at filing the income tax returns the probability of the application getting rejected is very high.
- If one has been late at paying the recent monthly payments, then again the chances of the mortgage modification approval are very bleak.
- If one wants to avail the loan modification services one should be able to demonstrate and convince the authorities that the future monthly payments of the mortgage will not be possible unless and until the loan modification program is approved.
- Most of the people want to modify mortgage just because they are not able to pay the monthly payments. If one fulfills the above-mentioned terms and conditions most of the loan modification companies will volunteer to offer professional loan modification services.
First things first, to qualify for Obama's home loan modification plan, your mortgage must be insured by either Freddie Mac or Fannie Mae. Currently, only these types of loans are eligible for the MHA plan. Also, the home must be your primary residence. Once you've met these two requirements, Obama's home loan modification plan gives you choices. You may either refinance or modify your current mortgage. Homeowner's who are current on their mortgage payments and have a loan balance less than 105% of the current value of the home are eligible for a refinance. If you have fallen behind on any payments, refinancing is not the route for you.
Do not lose hope. Obama's home loan modification plan also provides for those who are experiencing financial difficulties and have fallen behind on their mortgage payments. A loan modification under the MHA plan is open to both those who are current on their payments and those who have missed a few payments. You must own the home as your primary residence and have a monthly payment, which is greater than 31% of your gross monthly income. Obama's home loan modification plan is geared towards at-risk borrowers in danger of losing their homes. Help is given by adjusting various loan terms to make the monthly mortgage payment more affordable. What is considered affordable? By using a debt-to-income ratio, or DTI, lenders can compute a new monthly mortgage payment that does not exceed 31% of a borrower's gross monthly income. Once the new payment is determined, the lender must then adjust various loan terms to arrive at that payment. A lender will first reduce the interest rate of the loan to as low as 2% to try to arrive at a 38% DTI threshold. If 38% cannot be reached by the interest rate alone, the lender can extend the term of the loan up to 40 years, or they can forbear principal on the loan. Once the 38% is reached, the lender and the Treasury will institute a dollar per dollar matching program to adjust the rate even more and bring the new monthly payment to the 31% DTI limit.
Once a loan modification is achieved, borrowers have a "trial run" of three months to ensure that the new payment and loan terms are realistic. After three months of on-time payments, the new mortgage terms will be fixed for five years. Obama's home loan modification plan and the MHA plan is intended to stop the tide of foreclosures affecting the US economy and keep millions of American homeowners in their home. Loan modification program means the applicant applies to modify mortgage terms.
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