I had heard of loan modification for many years. In a few cases I actually helped some of my customers with loan modifications. In most cases however, I felt and guided my clients to other avenues that I felt would help them best. However, with the economy and credit and all the other new things going on in America right now, I have taken a second look at this whole Loan Modification idea. After searching high and low, I have found a program that I believe satisfies a client’s needs in a straight forward way.
Since the time the world economic crisis hit the American society, numerous American homeowners found themselves struggling to make their monthly mortgage payments due to the increase of their interest rate or because of the households’ significant income reduction. On many instances the things went so bad that some families moved close to facing the horrifying threat of their homes running the risk of being foreclosed.
A home loan modification is much like a mortgage refinance in that the objective is to find you a more affordable mortgage payment for your financial situation. In fact, it is often called a modified refinance. The primary difference is that instead of looking for a “new” loan you will just simply “modify” the terms of you existing mortgage with your current mortgage lender. Rarely does a person change their mortgage company when they seek a Home Modification Plan.
Some of the more common loan modification qualifications are:
- You have had a documented hardship of major change in your personal financial circumstances
- You have missed 3 or more payments, usually referred to as 90 day delinquent.
- You own and live in the property as your primary residence
- You have not filed bankruptcy
- You don’t purposely default to get a loan modification
- Actively seek to be responsible in working with your lender
On October 1st, 2010, HAMP officially implemented the new PRA or Principal Reduction Alternative guidelines for HAMP loan modifications. If you are struggling to make your mortgage payments and your house is underwater (you owe more than it is worth) you should be getting excited! Under the new Principal Reduction Alternative Guidelines, servicers evaluating HAMP modifications must do a mark to market loan to value (MTMLTV) ratio on any loan greater than 115 percent. If the loan is applicable, a principal reduction then becomes the next step to reducing your monthly payments to the 31% monthly income cap.
Under the previous guidelines, to make the 31% monthly income cap servicers would reduce the interest rate, extend the loan terms (30 to 40 years) and only use principal reductions as a last resort.
This should dramatically increase the amount of principal reductions for homeowners who are having trouble making their monthly mortgage payments. Homeowners must make timely mortgage payments after the HAMP principal reduction alternative program has been completed for them to receive the full benefits of this program.
These solutions offered by the Home Affordable Modification Plan should dramatically help many consumers. This federal government sponsored program is intended for helping millions of homeowners to save their homes. Of course, this is being backed by the Federal Government and that means it is being participated by the majority of lenders across the USA. Even if the program doesn’t cover all borrowers, still many of those who are able to provide proof of their income along with meeting certain other criteria do qualify for having their mortgage loan modified, in some form, provided they take the necessary steps and apply for their loan modification instead of waiting in hope their situation will get settled on its own.
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If you failed with making one or several scheduled monthly mortgage payments or if you feel the hardships you are experiencing are likely to make it hard for you to fulfill your mortgage repayment obligations in the near future unless the interest rate on your loan is reduced, it is extremely important that you do not wait another day. You need to get with someone that can help you with negotiating your loan modification terms with your lender based on the new Home Affordable Modification Plan provisions.
If foreclosure is in your horizon, do not worry. There may still be some opportunities for you. The Federal law provides that the foreclosure process must be stopped while you are being considered for the HAMP.
If this is your first mortgage on your primary residence, which originated before 1 January 2009, and if your monthly mortgage payment also exceeds 31% of your gross monthly income, you should contact someone today about the HAMP program or if you are inclined to do this type of thing yourself and have the where for all, you need to act quickly so that a loan modification plan can be worked out for you.
Monetary incentives are abounding for the banks and other mortgage lending companies through the current HAMP program. Currently there are 75 billion dollars in subsidies coming through HAMP. As I said, this makes for a very lucrative monetary incentive for the banks to co-operate with borrowers who qualify.
Here is the checklist of the financial documentation you are advised to have in your disposal while talking to your loan servicer asking to consider you for loan modification under HAMP:
- Information about monthly gross income, including recent pay stubs, if you are the borrower who receives salary
- Documentation confirming income you receive from other sources, if any
- Your latest income tax return
- Information about your assets
- Documentation confirming any subordinate lien mortgage on your home
- Account balances and minimum monthly payments due on all of your credit cards
- Account balances and monthly payments on all other debts (say, car loan)
- A hardship letter explaining why your mortgage has become not what you can currently afford (for example, your expenses could have increased because of the urgent need to undergo an expensive medical treatment)
These should cover also other borrowers, if any.
Have questions? Looking for assistance? No need to hire an attorney – you can have your loan modification done with ease using the Loan Modification Wizard, designed to lead you step by step through the entire process of your home loan modification.