When first applying for a loan modification each individual is hoping for the best result, a finalized agreement to lower your monthly mortgage payment. However, with the success rate, according to the governments scorecard in April only 25% of the individuals who applied received a finalized agreement with their lender. Although only 25% received a modification there could have been a better percentage. The scorecard specified about 30% of the applications which were denied were denied for missing a trial period payment and more stated income. Remember a mortgage company is looking to extend a modification to mitigate potential loss, and if you miss a payment or have stated income which cannot be verified, even by bank statements, then it isn’t a surprising denial. What you need to know is the “ins-and-outs” of a loan modification.
Mortgage Modification Qualifications : First, Why is it being offered? The agreement between the mortgage company and it’s borrower to modify a loan is offered to potentially mitigate loss. If you have a lot of equity and could sell your home to honor your contractual agreement, the bank will most likely not extend the new terms. However, if you are financially struggling, are unable to refinance, have very little or no equity at all, and potentially are going to miss payments or already are missing payments. These are situations where banks will review the potential to mitigate their loss.
Another reason banks have been agreeing to modify terms with borrowers is because of the incentives being provided by the Federal Government. Remember around $75 Billion in monies is being allocated to help struggling borrowers, and part of this money is paid to mortgage companies and investors to help homeowners who are financially strapped. Second, Mortgage Modification Qualifications. For more information pertaining to the standard qualifications for a new terms to be finalized please visit HAMP.
Third, Do Mortgage Companies “have to” offer the modification? The answer is really simple. Although mortgage companies are receiving incentives they do not have to accept every application. Remember, the purpose of a loan modification is to help homeowners who are struggling to keep their commitment and to avoid potentially greater loss if the homeowner went into foreclosure. If you are not struggling financially and if a modification will not mitigate the mortgage companies losses, then it is more likely that your application will be denied. So before applying refer to basic understanding #2.
Homeowners who use this plan and make their mortgage payments on time will be given a cash bonus from the Government, up to $1000 per year for 5 years for each year of on time mortgage payments. Their will be no additional chances to modify a home loan using this plan. There is no second chances with this Government mortgage bailout plan. After 5 years of the modified home mortgage have passed, the loans interest rates may be raised. This housing plan is meant to help homeowners regain their financial grounding and not designed for long term assistance. A home loan modification may be just the thing needed to avoid foreclosure or loan default, Luckily, with this “Making Home Affordable” plan, a homeowner can now easily refinance their home loan and save a lot of money doing so. Take advantage now while this plan is in effect to see major savings every month and save your home
Learn more about Obama Mortgage Relief Plan Qualifications.