The Ins And Outs Of The Making Home Affordable Loan Modifiation Program

President Obama’s administration’s $75 billion stop foreclosure plan to refinance and modify millions of homes, announced back in March, is a portion of the much larger Tarp II plan. If you are a homeowner in trouble of losing your home to foreclosure, or a homeowner that has not missed a payment, but would like to refinance to a lower interest rate, you have hopefully already started calling your servicer and asking for a mortgage modification or have contacted an Attorney based mortgage modification firm to handle the situation for you with the bank. The money used for this program comes from the $700 billion approved as part of Tarp I in late 2008.

The $75 billion dollar project deemed obama loan modification, pledges to make homeownership more affordable for as many as 9 million Americans. The program uses a combination of government subsidies and incentives (for servicer, lenders and borrowers) in an effort to reduce principal and lower interest rates on millions of American loans. Direct information on the details of the new plan can be found by going to www.Makingshomesaffordable.gov

The Home Affordable Refinance modification portion of the program helps homeowners that have lost value in their home, but are still current on their mortgage payments. It gives borrowers with conforming [/spin]mortgages|loans|notes|mortgage notes|home loans[/spin] backed by Freddie Mac and Fannie Mae the ability to refinance their homes with little or no equity. Those that could not refinance their mortgage into a lower interest rate loan, because they lacked the necessary equity, may now be able to receive a loan for up to 105% of their home’s market value.

The Homes Affordable modification portion of this program provides incentives to lenders in exchange for modifying home loans into payments that match 31% of the borrower’s monthly gross income. It is designed to curb millions of foreclosures for families that are struggling to meet financial commitments and on the verge of foreclosure. Hopefully this will be a long term solution to the landslide of foreclosures and not just a temporary ‘stay’, resulting in yet another financial/real estate upheaval later on down the line. Stabilizing home owners financially is looked upon as one of the major ‘trunks’ to getting the country – and its citizens -, economically stable yet again.

It’s not clear what every bank is doing to modify mortgages. JP Morgan Chase has publicly stated that they are not modifying the principal of any mortgages; instead, they are lowering interest rates for a period of 5-years. After the 5-year period, the interest rates will increase to current levels. Chase estimated that they alone would loan mod the interest rates on over 600,000 mortgages and that the number may end up closer to 1 million. The hope is that those 600,000 homeowners will not be in the same situation again in 5 years. Loan modifications are hopefully setting our economy up for long-term stability and not simply another round of ARMs.

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