The new FDIC loan modifications program is now supporting a more generous approach to help mortgage holders prevent foreclosure
. More than 6 million mortgage loans in America are delinquent; thus, more distress is predicted to affect the real estate business. The Government loan modification bill is considered to be a rescue plan to a high percentage of Americans who are struggling to pay their mortgages.
The new modification plan is encouraging lenders and bankers to modify loans at a cost that is less than the high cost of foreclosures. Moreover, the federal government offers to finance loans to get the monthly payment to less than 30% of a mortgage holders income. The FDIC offers the borrower a wide array of workout solutions. The current net value of the property is considered in modifying the loan. Most real estate properties' prices have fallen markedly in the past 2 years; thus, most borrowers are paying loans that are much more than the value of their homes.
Extension of terms and amortization of a loan is another modified loan strategy. Delinquent loans can be extended up to 40 years. Borrowers, who are facing foreclosure, can now remain in their houses provided that they modify their loans and deliver one payment on approval of the modification plan. Temporarily lowering the interest rate of the loan is another strategy that can be adopted in loan modification. The lender can cap the interest rate for a while and then re-increase them on annual basis. For the lender, it is actually better to receive less money than not at all. Money lenders and banks are looking to the darker side of the loan modification plans; however, these modified loans are expected to pump more fluidity in the financial market.
The new FDIC loan modification plans are directed to the neediest Americans. The federal government shall fund a modified loan in the following circumstances:
1- A loan that has been delinquent for more than 2 months
2- The borrower hasn't declared bankruptcy,so that foreclosure isn't the only solution for the lender
3- The loan is for a house that is used by the borrower as a residence; thus, excluding all investment property mortgages.
The FDIC loan modification plans have evolved following Presidents new bill. The new modification plans are providing solutions to all mortgage holders who are fighting to pay their loans. The new solutions are expected to have positive influences on both lenders and borrowers.