Times are hard and many people need to refinance their homes because they are having problems keeping up with the payments and may even be facing foreclosure. Fortunately, now there is help available through a loan modification program. These programs are designed for borrowers who are already in default 30 days or more and for those who are not able to get refinanced because of a lowered house value or because they are self employed.
The economy has turned borrowers who used to be able to pay their mortgages into potential foreclosure risks because of pay cuts, job losses, or rapid declines in appraised values on their homes.
The problem is that there are a lot of people who owe more on their homes than what it is currently worth. To make matters even worse, homeowners that are forced to sell their homes below the appraised value; so they can get out from under the mortgage payments they cannot afford any longer.
Some claim that a loan modification is the answer, but this information can be confusing. To make it easier, there are companies that you can consult who can help with the loan modification process. Homeowners can obtain a free consultation from a modification specialist who will be able to determine the modification program that is best for their needs, without all the confusion.
Once you go into loan modification, then it is the only modification you can get during the life of your loan. So keep this in mind and keep up with the terms of the modification. If you are one of the unfortunate borrowers that are 30 days behind, then you qualify as a default borrower and the more quickly your get to working on your loan modification the better your chances.
What the loan modification program does is to get your mortgage payments (principal and interest), your insurance, and any association fees reduced to where it is no more than 31 percent of your gross monthly income. To do this the lender adjusts first the interest rate you are paying and then the principal amount owed.
Terms are lengthened to as long as 40 years, interest rates are reduced to at least 2%, and the principal amount owed is reduced as a portion of the debt is forgiven by the lender or the repayment of it is delayed.
However, lenders are not required to take part in the loan modification program. To encourage their participation, the government is offering incentives to these companies. For example, for every year that a borrower remains in the program, the government will give the lender $1000 for up to 3 years. Then of course there is an incentive for the borrowers as well to stay in the program, the government will give an additional $1000 to the borrower by applying it directly to the principal of their loan over a 5 year period.
Borrowers currently in foreclosure or bankruptcy may be eligible under this new plan. In fact, those who have been forced to declare bankruptcy may be required by the courts to do a loan modification.
The loan modification program offers a great opportunity for borrowers who are eligible. You may want to contact professional help to gather the needed financial information and get through the process for the greatest reduction of mortgage payments.