The Obama administration brought about the loan modification program in order to help sinking homeowners. It’s designed to help homeowners come back to the normal repayment schedule with a limited period of help. This was an attempt to stop foreclosures and short sales for most part.
The program involves modifying the terms of the payment of the mortgage in such a way that it becomes more affordable. These programs act by extending the term of the loan, by reducing the rate of interest charged, changes in the type of loan and reduction in the outstanding balance. The period of help will end on January 31st 2012.
Individuals who wish to refinance, and are not being offered any new option by the banks, should definitely look at the loan modification program. Most of the time, banks or lenders aren’t keen on refinancing a delinquent or defaulting account. There are simple means by which you can prove your eligibility for this program and these criteria include:
· Documented evidence of hardship or change in financial situation,
· Delinquency for more than 90 days,
· The premise should be the primary residence of the applicant,
· Shouldn’t have purposely defaulted to get into the loan modification program
Some of the loan modification programs available are:
· White House – Treasury Loan Modification program
· IndyMac Federal Bank Loan Modification Program
· Federal Housing Finance Agency Loan Modification Program
· Other private programs are from
o Citigroup
o J P Morgan Chase
o Bank of America
The advantages of this program are profound:
· It avoids foreclosure and short sale
· Reduces the interest rates therefore the monthly commitment reduces
· It is a private arrangement between the lender and borrower
· Lower impact on the credit score than foreclosure of the borrower
· Borrower is able to stay in the house while availing the program
The disadvantages include:
· Getting the proof of difficult financials may be quite heady
· Only those with a mortgage amounting to 105 percent or less of home value would get the assistance.
· Hits the credit score or FICO score of the individual
· Some might deliberately miss payments
· Worthy borrowers are not getting the assistance
