New Loan Modification Program
The Making Home Affordable program can help borrowers to reduce their monthly payments to not more than 31% of their pretax income. This new loan modification program is available only to home owners with very specific circumstances.
Owners must live in their home. They can already be behind in their payments or they must prove that they are on the threshold of default because of hardship and they must make their new payment for a three month time trial period to qualify.
Let’s say a homeowner has a $320,000 mortgage but can't make the monthly payment of $2.023(excluding taxes and Insurance) Home Affordable could cut the payment to $1,254, with an interest rate of 2%.
Although the program only lasts 5 years, the savings can be dramatic.
In each of those years, the principal is reduced be $1000 if the owner stays current on their payments.
After the five years are up, the lender will the increase rate by one percentage point a year until it the prevailing rate is reached. Please visit makinghomeaffordable.gov for more details.
Homeowners who qualify must also find a lender that is both in the program and willing to help. Lenders get financial incentives from the government to participate.
Participation is voluntary but you can probably expect loan servicers that handle
loans guaranteed by Fannie Mae and Freddie Mac mortgages to participate.
Those lenders that participate are currently listed on the website.
If you need a loan modification, contact your lender and ask for the
Loss-mitigation or home retention department. If you don’t get the help you need
You could seek help elsewhere. Consumer Advocate, Ralph Roberts, located in Detroit (www.keepmyhouse.com)advises clients to hire an advocate.
A good option is to call a HUD Certified housing counselor for free help. You can call the Hotline at 1-888-995-4673 or visit www.hopenow.com Roberts also warns that loan- modification assistance is the gold rush of new consumer scams.
You may want to hire a real estate attorney to negotiate on your behalf. The lawyer should review all your original loan documents for signs that you were a victim of mortgage fraud.
If this proves to be the case, you could gain leverage to negotiate with your lender
whether they are participating in the program or not. The leverage may help you modify
or replace your loan as well as stall forclosure. If paying legal fees is an issue, seek help
from a legal-aid society or from lawyers doing pro-bono work.
SO: Money/Home:Kiplinger;July 2009