Home Loan Modification?

30.04.2013

In 2009, prompted by a continued decline in the prices of houses, coupled with increasing number of bankruptcies, the Congress decided to pass the Making Home Affordable Plan. Because of continued economic downtrend, rendering hundreds and thousands of people jobless, many prospective homeowners failed to make timely payments of their mortgages. Now, they may be eligible for availing modification of their home loans. With this new plan, the banks can amend rates of interest or the period for paying back loans, enabling the borrowers to make revised reduced payment to avoid foreclosure.

Modification Programs

The new program called HAMP, abbreviated form of the Home Affordable Modification Program, allows people, patronizing the Federal Housing Finance Agency, also called Fannie Mae or Freddie Mac for their mortgages, to be eligible for a separate program. Mind you, this program is valid only for FHFA borrowers. Most of the big lenders like Bank of America, Citigroup, J.P. Morgan, Nationwide and others have their respective modification programs. You may contact your lender to know for which program you are qualified for taking financial assistance. If that doesn’t solve your purpose, you may visit website of Making Home Affordable and make an online application to HAMP.

Types of Modification

The objective of home modification is to allow you to retain your house by finding an affordable payment program for you.  The lenders would basically make two kinds of revised offers to allow you to pay mortgages. Option one is to reduce the rate of interest and see if the revised payment plan suits you. The amended rate of interest could be as low as just two percent! When the borrower is unable to pay despite the revised interest rate, the lender would offer to extend the duration of the loan, meaning if you were to pay the amount over thirty years as per the original program, now you may be asked to pay it over forty years.

Who is eligible?

To avail of home loan modification, you need to prove that with your present financial status, you are incapable of paying your mortgage. Before you approach the bankers and request any amendment, you should collect all information and data concerning your income and other payable debts. HAMP stipulates that your present mortgage payment has to be more than 31% of your gross income. Additionally, the mortgage for which you are seeking amendment must be for your main residence and you must have availed your original loan of not more than $729,750 before Jan. 1, 2009.

Other Options

Still, if you are unable to pay your mortgages, you get another option, provided your credit score is good. You could get your house refinanced, paying lower rate of interest or get an extension of time for paying back your loan, in place of home loan modification. If you don’t afford to pay mortgage due insufficient income, despite a reduced rate of interest or extension of time for paying back the same, you may be eligible for the Home Affordable Foreclosure Alternative program. You can seek help from HAFA for selling your house through a short sale and assist you in finding a house that you can afford to pay for. In place of a sale, HAFA discusses with your lender to persuade them to accept the house as is, without insisting for foreclosure of property. You can’t rule out the possibility of getting some money in the process, enabling you to relocate!

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