How Obama's Home Affordable Modification Program Can Help Your Mortgage

If you’re one of the millions of Americans struggling to make your mortgage payments in this difficult economic climate, then you’re certainly not alone.  Thankfully, there is help available to make sure that your home doesn’t fall into foreclosure.

President Obama’s Home Affordable Loan Modification Program is set to rescue three to four million households between 2009 and December 31, 2012. The core of this program is to make the process of modifying your current home loan much easier.

The Obama administration quickly wrote up this $75 billion plan in an attempt to rescue millions of Americans who are currently suffering from plummeting property values and soaring mortgage payments, thanks to adjustable rate mortgages.

Program Provides Benefits to Both Homeowners and Lenders

The Home Affordable Loan Modification Program not only benefits homeowners, but lenders as well, thereby providing incentive for banks and other lending institutions to jump on board with this new program.

For example, if your lender is able to negotiate a mortgage loan modification for your home so that your payments are more manageable, your lender will receive $1,000 for three years. This incentive is designed to cut the losses of the lenders who, upon modifying home loans, will receive less money each month. In other words, although the lender will take in less money from homeowners because of less earned interest, the Home Affordable Loan Modification Program will make up a large portion of that missed income.

It is also important to understand that a lender also has an incentive to negotiate a mortgage loan modification because it will increase the chances that the homeowner will be able to manage their monthly mortgage payment.

 Behind On Your Mortgage? Modify Your Loan and Keep Your Home.

Details of the Program

Under this new program, a mortgage loan modification may be extended over a period of five to 40 years, depending on the homeowners’ individual needs and financial circumstances. The total interest paid by the homeowner under this program will be dependent upon their financial hardship.

Homeowners that do not qualify for the Home Affordable Loan Modification Program (i.e. if their lender does not consider them in financial hardship) may be eligible for the new Home Affordable Refinance Program, which may help nearly five million Americans whose property values have seen sharp declines.

To qualify for the Home Affordable Loan Modification Program, you must meet the following criteria:

• You originated your loan before January 1, 2009.
• You must occupy the property.
• You must have an unpaid balance of less than $729,750.
• You must show proof of financial hardship.
• Your monthly mortgage payment must be more than 31 percent of your gross monthly income.

In addition, you must successfully complete a three-month trial period under your new mortgage loan modification. In other words, if you make all of your payments on time during the trial period, your new lower interest rate will become fixed for the next five years.

Behind On Your Mortgage? Modify Your Loan and Keep Your Home.