Digital News Report – President Obama has modified the government loan modification program to help more people. There is a new strategy to help prevent foreclosure and a tool to help Americans write-down their mortgages.
The program has generated a lot of enthusiasm and hope for those Americans under-water and facing foreclosure. There are incentives for both the borrower and the lender to work out an agreement to save homes.
There are two basic options:
1) Homeowners who owe more than their house is worth may qualify for an FHA “short finance” option. Borrowers may qualify for this smaller loan but lenders are not required to accept it.
The lien holder must agree to a 10 percent (minimum) cut to the first mortgage down to 97.75 percent of the property value. This loan modification may be appealing to investors who hold the loans not backed by Fannie Mae or Freddie Mac.
2) The Home Affordable Modification Program (HAMP) has been modified and expanded. This program is designed for people who have mortgage payments exceeding 31 percent of their income.
Banks don’t have to agree to the terms but there are incentives. Borrowers need to owe more than 115 percent of their homes value.
The good news is that these programs are free. The government warns Americans to beware of scams. “Beware of anyone who asks you to pay a fee in exchange for a counseling service or modification of a delinquent loan,” the government said on their website.
By: Tina Brown