Digital News Report – This week the Obama Administration explained how the new version of the loan modification program will work. The plan is to use $75 million of money already set aside by the Troubled Asset Relief Program (TARP) to help families that are “Hardest-Hit” by the recession.
Homeowners that owe more than their house is worth are targeted for this program. The government will also use another $600 million for “innovative measures”. The unemployed can get a 3 to 6 month suspension of their mortgage payments
While there are 10 to 12 million homeowners in trouble, the goal is to help 3 million to 4 million borrowers avoid foreclosure by the end of 2012. So far the program has only helped 170,000 homeowners but the banks have been aggressively modifying loans over the past three months. If the trend continues the Administration may meet their goal.
Homeowners need to be underwater and owe 115 percent more than their house is worth. Initially the loan will be temporarily modified to keep the homeowner above-water but if the payments are made on-time for three years the modification can become permanent.
The loan modification service is free. Servicers are paid by the government, but you will need to choose one that has been approved for the program. There are incentives for the banks to modify the loan as well.
By Tina Brown