It may appear that a new "super hero" has appeared on the scene, ready to rescue anyone being defeated by a crippling mortgage rescue plan, but is this a real "hero" or just some guy dressed in a cape? Can mortgage modifications rescue you, or is it all just hype? What is a mortgage modification and can it really rescue you from the threat of foreclosure? A mortgage modification is an adjustment to your current loan perimeters. It has the potential to lower your current loan payments, or interest percentage, although in some cases it may just be temporary.
In most cases a mortgage modification will affect the interest on a loan, not the principal. Interest is typically what is crippling you, in the first place. A lot of times what has happened is that you acquired a mortgage with a low variable rate and as the economy changed so did the rate, possibly as much as 100%. The mortgage modification re-adjusts this interest rate, reducing it back to an amount you can deal with. By reducing the interest rate you can reduce the amount of the monthly payment and overall interest paid drastically. Sometimes this is only for a limited period of time, such as 5 years.
In the past, people have needed 20% equity in their homes before they can refinance, but Hope for Homeowners relaxes that requirement, meaning that falling property prices has erased much of the equity that homeowners have built up in the past. The plan keeps falling house values from hurting homeowners who can't make monthly payments. If a Hope for Homeowners refinance doesn't work for them, HUD counselors are directed to offer a second option. The President has created a $75 million Homeowner Stability Initiative to modify the mortgage loans of 4 to 5 million American homeowners living in crisis. Lenders may modify certain loans under a consistent set of guidelines in order to lower monthly payments to 31% of a borrower's gross monthly income.
The money in this initiative goes to pay financial incentives of $1,000 to lenders and borrowers who participate in the program. If the lender deems that a modified loan with incentive payments is more profitable for them than foreclosure, the loan is modified. There will be a three-month trial period for modified loans. For the next 90 days, the borrower pays on the new modified monthly premiums, and if that is done successfully the modified loan terms stay in effect for the next five years.
The interest rate stays at its new low rate for those five years, after which it can be raised 1% per year until it reaches market averages. The President's Making Home Affordable project tries to respond to the concerns of real homeowners like you who are worried about high monthly premiums, due to loss of income or loss of home equity. Obama's loan modification plan will cut back on the country's high number of annual foreclosed homes, gradually causing economic conditions and house prices to go back up.
In most cases a mortgage modification will affect the interest on a loan, not the principal. Interest is typically what is crippling you, in the first place. A lot of times what has happened is that you acquired a mortgage with a low variable rate and as the economy changed so did the rate, possibly as much as 100%. The mortgage modification re-adjusts this interest rate, reducing it back to an amount you can deal with. By reducing the interest rate you can reduce the amount of the monthly payment and overall interest paid drastically. Sometimes this is only for a limited period of time, such as 5 years.
In the past, people have needed 20% equity in their homes before they can refinance, but Hope for Homeowners relaxes that requirement, meaning that falling property prices has erased much of the equity that homeowners have built up in the past. The plan keeps falling house values from hurting homeowners who can't make monthly payments. If a Hope for Homeowners refinance doesn't work for them, HUD counselors are directed to offer a second option. The President has created a $75 million Homeowner Stability Initiative to modify the mortgage loans of 4 to 5 million American homeowners living in crisis. Lenders may modify certain loans under a consistent set of guidelines in order to lower monthly payments to 31% of a borrower's gross monthly income.
The money in this initiative goes to pay financial incentives of $1,000 to lenders and borrowers who participate in the program. If the lender deems that a modified loan with incentive payments is more profitable for them than foreclosure, the loan is modified. There will be a three-month trial period for modified loans. For the next 90 days, the borrower pays on the new modified monthly premiums, and if that is done successfully the modified loan terms stay in effect for the next five years.
The interest rate stays at its new low rate for those five years, after which it can be raised 1% per year until it reaches market averages. The President's Making Home Affordable project tries to respond to the concerns of real homeowners like you who are worried about high monthly premiums, due to loss of income or loss of home equity. Obama's loan modification plan will cut back on the country's high number of annual foreclosed homes, gradually causing economic conditions and house prices to go back up.
