It's Not Too Late: Obama's Mortgage Relief is Now More Streamlined

Obama’s Mortgage Relief Program faced great criticism when it was unveiled earlier this year.  However, the Treasury Department has recently announced that the original mortgage refinance program is now more streamlined, thereby making it easier for weary, struggling, homeowners to secure help. 

Better Timeframe for Homeowners

In particular, Laurie Ann Maggiano of the Treasury Department announced that homeowners participating in the program’s loan modification program will now have five months – instead of the original three months – to prove themselves worthy of lower payments and a lowered interest rate.

Under the terms of the original Mortgage Relief program, homeowners have to pay their mortgage on time for three months before they can qualify for the lower interest rate; however, the program has since changed to provide homeowners with five months to prove that they are a good candidate for the program.

There will also be other changes to the Mortgage Relief Program that will help homeowners to more easily take advantage of the refinancing mortgage program as to avoid foreclosure.

Two Arms of the Program

There are two programs that exist under Obama’s Mortgage Relief Program: the Home Affordable Modification Program (HAMP) and the Home Affordable Refinance Program (HARP).

Although the features of the two mortgage refinance programs vary, depending on the individual circumstances and the lender, both programs may enable homeowners to reduce their interest rate, change the terms of the loan, and lower the monthly payments of the loan when refinancing mortgage loans.

The details of the Home Affordable Modification Program (HAMP) include:

• The lender must bring down the homeowner’s interest rate so that the total monthly mortgage payment does not exceed 38 percent of his or her income when refinancing mortgage loans.
• The program will match further reductions in the borrower’s interest rate so that the lender will bring the ratio of the borrower’s income to his or her monthly mortgage payment down to 31 percent.
• The borrower will be given a period of five months during which he or she must prove that he or she can make the new payments on time. If the payments are made on time during the trial period, the lender will implement the lower interest rate for a period of five years.

Any homeowner, under the Department of Treasury guidelines, who is experiencing financial hardship (through a number of factors, including their mortgage debt compared to their income or their mortgage balance compared to the current market value of their home) is eligible for this mortgage refinance program.

The HAMP is designed to benefit both homeowners and lenders, as well as provide incentives for both parties to make the program work for refinancing mortgage loans.

For example, the lender receives $1,000 a year for a period of three years for each home loan that is established under the HAMP initiative.

Borrowers are also given an incentive to stick to the mortgage refinance program, as they will receive a monthly balance reduction payment that is applied to the principal of their loan. The borrower can receive up to $1,000 a year for five years, provided he or she stays current on the mortgage refinance.

Both homeowners and lenders are being encouraged to participate in one of the two mortgage refinance programs offered under Obama’s Mortgage Relief Program.  Now it is up to the borrowers and the lenders to work together to resolve the mortgage crisis that is so deeply affecting the country.

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