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Get Bailed Out with the New Federal Mortgage Loan Modification Program

If you’ve missed to meet some of your mortgage payments, then you are already at risk of defaulting on your loan which may trigger the start of the repossession process. The government has created two potentially helpful plans to bail you out. The first one is referred to as Mortgage Loan Modification.

If passed by Congress, there are some required qualifications in order to take advantage of the program.

• The mortgaged house must be your current residence

• You need updated Tax returns and payment receipts as your proof of income

• The mortgage ought to be signed and accomplished on or before January 1, 2009

• The first mortgage should be lower than $729,500

• If the total debt of your household exceeds 55% of your regular income, you must undergo compulsory credit counseling

• You must submit a convincing financial hardship letter handwritten and signed by yourself

These are features that banks can do under the Mortgage Loan Modification program.

• Banks can bring down monthly mortgage payments to 31% of your monthly earnings.

• A low 2% interest rate is available but the 4.5% rate usually applies.

• The homeowner is not required to pay any loan modification fees since the provider will be paid by the government.

• The bank will require a balloon payment if the mortgage is fully paid, refinanced, if the payments are too low or if the property has been sold.

• You are allowed only one modification on the program so there will be no further negotiating in the future.

An incentive plan is attached with the program to encourage prompt mortgage payments. If your payments are made on time, the Mortgage Loan Modification program will lower the principal balance bit by bit over a period of 5 years, with up to $5,000 maximum reduction. The balance will be adjusted back up to its normal rate after five years. The rate is reduced merely as an aid to ease your payment burden, if only temporarily.

If you are up-to-date on your monthly payments, your bank will probably not allow any modification on your existing mortgage since the property’s value is now less than your present principal balance. You, in this case, can qualify for the government’s second mortgage bail-out program, the Refinancing Option.

You should have the following requirements to qualify for the Refinancing Option.

• The property should be your main residence.

• Your income should be sufficient to fund the new mortgage option.

• The cash from the new loan cannot be used to pay for other debts.

• Your loan should be owned by either Fannie Mae or Freddie Mac.

• Your loan’s interest rate will be based on current market values and further fees and points may be charged in a later date.

• The mortgage will be covered in 15 to 30-year durations with fixed interest rates.

• You can pay lower interest rates in the first five years of your new loan.

If the appraisal of your property is far below value, the government’s two mortgage bail-out programs may not help you at all. At present, the maximum value of the mortgage balance is set at 105%. It means that if your house’s appraised value is currently $200,000 , then $210,000 is the maximum principal balance.



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Article Source:http://www.articlesbase.com/personal-finance-articles/get-bailed-out-with-the-new-federal-mortgage-loan-modification-program-824327.html
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March 21st, 2009 | Category: Personal Finance | Comments Off
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