The primary purpose of mortgage modification is to help the distressed homeowners who are not   being able to make mortgage payments. It helps a homeowner to avoid foreclosure by extending the loan term, reducing the interest rate, changing the loan type, and reducing the principal amount. If you live in a state where there is several foreclosures like Arizona or Michigan and you are filing bankruptcy you may want to consult with a Arizona bankruptcy attorney or Michigan bankruptcy attorney for advice about modifications and to see what are trends in your local jurisdiction.

Features of the Obama mortgage modification plan

This plan is designed to help the borrowers avoid foreclosure. According to Obama’s mortgage modification plan, the monthly mortgage payment has to be around 31% of your gross monthly income. The lender/service provider will reduce the interest rate to as low as 2 percent so as to lower the monthly mortgage payment. They can even extend the loan term up to 40 years or can arrange the loan principal at no interest. The borrowers will be paid $1,000 (annually) for up to 5 years provided he remains current on the loan. The lender may receive up to $1,500 payment for a qualifying mortgage modification. It is said that the total government subsidy for the plan can run up to $10,500 per home.

General qualifications for Obama mortgage modification

The qualifications for Obama mortgage modification are given below:

  1. Finalcial hardship: You have to prove that you have missed three loan payments due to financial hardship (lost your job, medical problems, pay reduction, increase your expenses, etc).
  2. Bankruptcy: You have to prove that you have not declared yourself bankrupt. The financial institutions will check whether restructuring things will actually help to improve your situation.
  3. Loan amount: The loan amount must be around $729,000, without including interest.
  4. House: The house on which you have taken the loan has to be your primary residence. If you have purchased the house as an investment property or as a second home, then you have to look out for other options.
  5. Time: This plan is applicable to those loans that have been taken before January 2009. If you have taken the loan after January 2009, then you have to talk with your lender regarding other possibilities.

Finally, Obama mortgage modification plan also addresses the issue of second lien such as home equity loans. The plan offers incentives to extinguish them.

Related posts:

  1. Avoid Foreclosure By Mortgage Modification
  2. Loan Modification and Credit Problems
  3. What Is A Loan Modification Program
  4. What You Need To Know About Home Mortgage Payment Protection Plan
  5. Home Loan Modification vs Mortgage Refinancing
  6. Loan Modification – A Refinance in a New Dress?
  7. The Facts about Mortgages in Tuscaloosa
  8. Can I keep My Home in Bankruptcy?
  9. Facts About A No Doc Mortgage Loan
  10. Ways Of Stopping Foreclosure Fast
  11. Homeowner Loan – Know The Facts
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  13. Thinking About Remortgages? Learn the Facts First
  14. Debt Negotiation: Not the Best Debt Reduction Plan
  15. Short Selling Your Home More Beneficial Than A Loan Modification When Facing Foreclosure