
An initiative of $75 billion also known as the homeowner affordability and stability plan has been announced recently by President Obama. One of the basic doctrines of Obama's Home Loan Modification plan is known as making home affordable initiative. This initiative constitutes of two elements.
One part of the home affordable refinance program is addressed to those homeowners who cannot avail refinance because of the depreciation in the value of the house. In these cases the present loan to value ratio is more than the 80% mark. The current mortgage should be owned by either Freddie Mac or Fannie Mae.
The other part of Obama’s Loan Modification Plan is tailored to decrease the mortgage payments that are paid monthly. This is especially for the people who are on the verge of foreclosure and want to modify the mortgage and reduce the monthly payments. In this part it is not necessary that the first mortgage loan be given by Freddie Mac or Fannie Mae.
Some of the reasons why people seek loan modification are as follows
Nowadays, when recession has gripped the economy and estate prices are plummeting, making home affordable is not an easy task. The monthly payments that were once upon a time easily affordable are becoming a financial hazard for the homeowners. The homeowners cannot afford the monthly payment of the first loan and seek Obama's Mortgage Loan Modification to make the home loan affordable.
In most of the cases, refinancing of the first loan is not possible because of the depreciation of the house values. The only other option left to make the loan affordable is to seek the home loan modification program.
The Obama’s loan modification program comes like the rain to the Sahara. The purpose of this home loan modification program is to reduce the monthly payment, lower the rate of interest, and make the monthly payment affordable in such a way that it does not exceed 31% of the gross income of the debtor.
Mortgage lenders, because of the current recession, are hesitant in approving the refinance loans. Keeping this mentality into consideration, the Obama's home loan modification program is providing cash incentives to the loan servicers and the mortgage lenders.
For each home loan modification application that is eligible and qualifies for the program, the providers get $1,000 as an upfront fee. If the borrower remains regular at paying the monthly payments, the providers will get $1,000 per year for a duration of 3 years.
The servicers will get an incentive of $500 if they help the lender to focus on the debtors that try to be regular at paying the monthly payments. The mortgage lender will get $1,500 if the borrower modifies the loan prior to falling behind on the monthly payment schedule.
The homeowners who are regular at making the monthly payments of Obama's Mortgage Loan Modification are eligible to avail a reduction of $1000 per year in the principal amount of the loan for duration of 5years.
Some of the guidelines for Obama’s Loan Modification Program are as follows
