subject: Qualifying For The Obama Loan Modification Plan [print this page] As our great nation is in an economic recession, the Obama administration has a plan in effect known as Making Home Affordable for loan modification for millions of homeowners. The objective of the plan is to provide assistance to homeowners mortgage and lower the amount of foreclosure notices .
What Are the requirements for mortgage loan modification?
It just may surprise you that the homeowner must have a Fannie Mae insured mortgage loan. If that passes the test, you have to live in a owner occupied home to refinance or alter the terms of your home loan from the initiative.
The guidelines of MHA offer homeowners two different choices and their first one is to refinance their mortgage. Their other option is to modify their existing mortgage. People can use this plan if they have not become late on their home loan payments and owe less than 105% of the principal balance.
If they are not eligible for the standard home loan refinance, they can use the MHA Plan while paying their existing mortgage on time. Borrowers who have become late on their mortgage loan bills can get loan modifications. As long as it is their primary residence they own and have a monthly payment that is greater than 31% of their gross monthly earnings.
The purpose of the loan modification program is for homeowners at-risk and regulates the terms of their home loans as a result they will get under 32% of their gross monthly income. The initial phase is for lenders to reduce the interest rate to around 3% in order to get a 39% debt to income ratio. And if the interest rate is at 3% and still doesn't get them to 39% debt ratio, then additional modifications can be done. Additionally, the lender can increase the loan term up to 40 years, and then they can even start to reduce the principal balance of the loan.
by: Ray Heinson
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