Obama’s Loan Modification Plan Offers Homeowners 3 Options — Which One Is Right For You?
Financially distressed American homeowners can get relief through President Obama’s loan modification plan. The Treasury Department is offering three options; depending on your situation, you could be eligible for one of them. $75 billion has been budgeted to bail out homeowners stranded by the foreclosure crisis. Learn the choices so that you know which one could give you the help you need.
Loan modification plan, option number one, gives mortgage holders a chance to refinance their loans using current low interest rates. To be eligible for this option, you cannot at present owe more than 105% of your home’s current market value. Also, you cannot be late on making your mortgage. This refinance plan applies only to your first trust deed, and if you have a second mortgage loan, then the lender must agree that option number one will be paid first.
Loan modification plan, option number two, offers qualified homeowners a loan modification program with interest rate reductions as low as 2%, with the terms of the loan extended to as long as 40 years, and some deferral of principal on their first trust deeds. The target payment under this plan is 31% of the mortgage holders’ gross monthly income. If there is a second loan on your home, the plan now requires a modification on that loan as well, with interest rates as low as 1% or 2%. The debt may be erased completely in some cases.
Lending institutions receive an incentive payment from the Treasury Department for each completed loan modification. Borrowers who meet the terms of their modified payment scheme are also eligible for up to $6,000 over the next five years. If you owe too much on your home, or if you have a delinquent payment history, the Home Affordable Modification might be the option for you. You need to know the requirements for approval, and how to prepare your application accordingly, before you call your lender to apply. Take time and be careful not to make any mistakes. Make sure that you know how to qualify.
Loan modification plan, option number three, is a deed in lieu of foreclosure or a short sale. Now, the federal government grants a $1000 payment to lenders who allow a sale in which the proceeds are less than the total still owed on the property. In this case, the government shares the cost of eliminating second liens against the property as well. If a short sale does not happen, then the homeowner can surrender the keys and transfer the house without going through foreclosure proceedings. Such borrowers may qualify for $1500 in relocation expenses.
All three options under President Obama’s loan modification plan encourage lenders to work with borrowers by offering financial incentives to find a solution quickly. Still, not all borrowers will qualify. If you are facing financial distress, learn more about the programs to see how you might qualify for help. You will need to spend some time and effort to prepare before you contact your lending institution. The federal government wants home lenders and borrowers to work together, directly, rather than through third-party loan modification corporations. This is because those middlemen companies charge borrowers large fees. If you learn how to get help, you can deal directly with your lender. Learn how to prepare, so that you can get your life back on firm financial footing.