Loan Modification Programs Provided by the Federal Government

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Loan modification in basic terms is inquiring from the bank to change the conditions on a mortgage loan to help make the obligations affordable. Whether it is called a loan modification, mortgage modification, restructuring, or workout plan, it's the situation where a borrower deals with a foreclosure that they try to work with the lender to allow them an attainable program to generate the monthly payments of their mortgage acceptable for them. The grounds for their request is a result of some difficulties that they are facing at the present and are trying to sort out to preserve their property. The workout plan may vary by lender, but adjustments can include temporary or irreversible modifications to the mortgage rate, term and monthly payment of the loan, the past capital amount may be combined into the loan, and the latest balance re-amortized.

In 2009, the federal government launched the Making Home Affordable Program which comprised of two programs: one for loan modification and one for refinancing loans. The loan modification program is called the Home Affordable Modification Program (HAMP). It was meant to reduce the mortgage payments for property owners so they can have an attainable level of monthly amortization. The refinance plan is referred to as Home Affordable Refinance Program (HARP). To be qualified for the application, you have to: be an owner-occupant; your mortgage originated before January 1, 2009; the unsettled balance of the mortgage is equal to or less than $729,750 for a single-family property; you are unable to pay your mortgage due to financial hardship such as decrease in monthly earnings, health conditions, and the like. You will be required to create a letter indicating your financial hardship; and your monthly mortgage payment must be more than 31 percent of your gross (pre-tax) monthly earnings.

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You are not eligible for HAMP loan adjustment if you purchased your home for investment reasons. All properties must be owner/occupied. In addition, if you really cannot manage to pay the property due to recent unemployment or complete impairment to pay. In addition, mortgages with amounts above the conforming loan restrictions will not be eligible.

If in the event you won't be eligible for the loan adjustment being offered by the government there are additional loan modification programs offered. HAMP, HAFA (for short sales) and 2MP (for 2nd mortgages) are not the only applications accessible to homeowners. If you are not approved for these programs it will not imply that you cannot obtain a loan modification. There are private loan modifications available provided by your financial institution which can be provided on a situation to situation basis. They are privately negotiated loan modifications where lenders can agree or may also disapprove based on individual necessities. These lenders can range from Freddie Mac, Fannie Mae and several other major loan providers. You have to know who own the loan and the entity you may be working with.

If you will transact directly with your loan provider on a loan modification, ensure that you make a research and do your homework first and know the things you need to prepare. Figure out what you are talking about, arrange your finances and create a convincing hardship correspondence ready. You'll have better chances of having a loan modification if you are equipped.

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