There’s been a lot of talk lately about Mortgage Loan Modification Programs. What are they exactly? Well, although there are many different types of modification programs, they basically all do the same thing – they modify a current mortgage loan into a loan that will hopefully ease some of the burden the homeowner is feeling during these economically challenging times. These loans are mostly for responsible homeowners at risk of loosing their homes. There are a lot of homeowners who have found themselves in unavoidable circumstances such as job loss or high medical bills and found that regular refinancing wasn’t an option because of declining home values, but there are also many homeowners who were living on the edge financially with too many credit card bills, expensive auto loans and just a higher cost of living in general. With so many people at risk of loosing their homes and all the millions who already have, the mortgage lenders and the government knew they had to do something to stabilize the housing market.
As part of an effort to stabilize the housing economy, the Obama Administration announced the Making Home Affordable Program in 2009. Under this program, it’s hoped that several million people will be able to keep their homes. It gives incentives to mortgage lenders to work with homeowners on lowering their monthly mortgage payments and getting current on their loans. There is a 3 month trial period for these loan modification programs to see if the homeowner can make their new reduced payments on time before they are actually approved into the program. There are basically five different programs that homeowners can apply for:
1) Home Affordable Refinancing – If you are current on your loan and in good standing with your mortgage lender, this loan is for you. It will help you take advantage of lower interest rates that you maybe aren’t able to get because of declining home values.
2) Home Affordable Modification – This program is for homeowners who have had their interest rate increased or had a loss of income and are falling behind on their mortgage payments.
3) Second Lien Modification Program – If a homeowner already has a modified mortgage plan under the Home Affordable Modification Program that they are successfully paying on time, this program will also help with any second mortgage they have
4) Home Affordable Foreclosure Alternatives – If a homeowner finds they cannot get approved for a loan modification and just can’t afford their home anymore, the mortgage lender may accept a short sale – which is where the lender allows the homeowner to sell the house for a lower amount than they owe on the mortgage and the lender calls the debt even. There is also a deed-in-lieu foreclosure where you basically turn the title over to the mortgage lender instead of going through the expensive foreclosure process. This program offers incentives to the mortgage lender and also up to $3000 to the homeowner to help them relocate.
5) Hardest Hit Fund – This fund was set up for the ten states that have been the hardest due to either unemployment or the decline of property values. These states are Arizona, California, Florida, Michigan, Nevada, North Carolina, Ohio, Oregon, Rhode Island, & South Carolina. The help available varies state by state as each state had to submit a proposal of how they were going to spend the funding to the Administration.
The more knowledgeable you are on helping your own situation the better off you’ll be. There are many Modification Specialists popping up all over the place claiming to help you lower your monthly payments or help you avoid foreclosure. And although they do what they promise to do, they also charge you for it. You do need to make sure you’re dealing with a reputable company if you decide to work with a Modification Specialist – there are many scam artists out there preying on homeowners who are afraid of loosing their homes.
You don’t have to pay for the help you need. Talk to your mortgage lender first – they know about all these programs – and they may even have their own hardship programs set up to help you get back on track. A really good place to get the information you need is through the Department of Housing and Urban Development. Their website (http://www.hud.gov) has all the information you need on the different programs available to homeowners. They also can help you get in contact with a local debt counselor for little or no charge to figure out your own individual situation if you’re looking to modify your mortgage because of financial problems. This website also has a lot of good advice on the scam that are out there right now and how to avoid them. They also have links to other sites that are credible.