Can I get a LOAN MODIFICATION?

Home owners may qualify for a modification if the answer is "YES" to these five basic questions:

1) Is the home the primary residence?
2) Is the amount owe less than or equal to $729,750?
3) Is the homeowner having trouble paying the mortgage? In other words,
has the mortgage mayment increased recently,
has income dropped
are there other hardships, such as medical bills, that increased a
a hardship?
4) Was the current mortgage obtained prior to Jan. 1, 2009?
5) Is the payment on the first mortgage, including principal, interest, taxes,
insurance and homeowner's association dues if applicable more than 31 percent of
current gross income?

Information on how to get started and what assistance is currently available to refinance a loan or obtain a loan modification can be found online at

www.MakingHomeAffordable.gov

For example, the administration's website makes it easy to determine if a loan is owned by Fannie Mae or Freddie Mac, a key criteria of eligibility for refinancing assistance.

Mortgage servicers by Aug. 1 will offer borrowers a forbearance period to temporarily reduce to 31 percent of gross monthly income or suspend monthly mortgage payments while homeowners seek a job. Details of this new program are also available at the above mentioned website under the section titled "Help for the Unemployed".

Today's lower interest rates offer a unique chance to refiance loans, perhaps bringing a loan to a more affordable level, thus improving its long-term affordability and sustainability. To qualify for refinancing, the amount owed cannot exceed 125 percent of a property's current market value. Income must be fully documented, presenting pay stubs and tax returns, and the total loan amount cannot exceed $729,750.

The website mentioned leads eligible applicants through the procedure and provides required forms that must be completed to get started. If a servicer provides a trial payment period, the applicant must make all payments. If he fails to make a payment he is out.

Most importantly, if a final modification has not been approved, owners should continue to make monthly payments even if the trial period has ended.

Applicants must be truthful when asked to state income and debt. Don't hide anything. They will find out.

Applicant's who have excessive debt - owe more than 55 percent of gross income - are required to go counseling to get expenses under control.

If successful, a loan modification can bring the interest rate to as low as 2 percent or could possibly extend the term of the loan to 40 years, with the goal being to bring total payments lower than 31 percent of gross income. To achieve that, a portion of the principal can be deferred, interest free, until the loan is paid off.

Principal forgiveness is allowed, but not required. No more than 31 percent of market value can be deferred to make the loan more affordable to the borrower.

Be beware of scams that promise owners that they can obtain a loan modification from any lender. The Making Home Affordable program and approved debt counselors are free of charge to taxpayers. Payment of a fee does not guarantee success. Walk away if any make promises and want to collect a fee.

(rewritten article from Realtor Report, July 2010)