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Obama Loan Modification Plan – Top 10 Questions & Answers
Obama’s mortgage restructuring plan will give a second chance to millions of homeowners stuck with unaffordable mortgages. A standard plan called Home Affordable Modification, or HAMP for short, seeks to provide a way out of foreclosure for qualified homeowners. Participating lenders will be given a financial incentive to offer the plan to interested homeowners, however each application will be reviewed and a decision made on a case-by-case basis. Learn more about how it works to find out if you may qualify for help.
Top 10 questions on Obama’s tax reform plan:
#1: Do I have to be late on my loan to qualify? No, the program aims to prevent foreclosure for all homeowners who are facing financial difficulties now or in the future. Lenders and servicers are paid more to service bad loans. You must pass the “imminent risk of default” calculation to qualify. Do you know how to calculate this initial approval?
#2: How do I know if my loan is eligible? If your loan amount is $729,750 or less and it was originated before January 1, 2009 it will probably be included in the Obama loan modification plan. (High loan is allowed for 2-4 unit properties)
#3: I have a duplex, and I live in one of the units – can I apply? Yes, as long as it is your primary residence. Investments, second homes or rental properties are not included in the program.
#4: My current mortgage payment is unaffordable, how low can my modified payment be with this loan modification program? The plan aims to lower your monthly mortgage obligation (including taxes, insurance and HOA fees) to equal 31% of your monthly income. If your current payment is equal to more than 31% of your total, you may qualify for a down payment. Get help calculating your target payment with Loan Mod Quick App software – it does all the calculations for you automatically.
#5: Will this loan modification plan work for my second loan? Yes, the program has been extended to include second loans as well. The conversion process involves lowering the interest rate to 1% or forgiving the principal balance. The Treasury subsidizes banks at 12 cents on the dollar.
#6: Does my lender have to offer me this loan modification plan? No, it is a voluntary process. Most lenders and service providers are expected to participate however due to generous incentives offered by the Treasury Department. Additionally, if you have 60 days or more and your bank participates, they will need to evaluate your loan to see if you qualify.
#7: How will my lender lower my payment so that I can reach the 31% credit limit guideline? First, the interest will be reduced to less than 2%, if the rate is still too high, then the period will be extended to 40 years. If more is still needed, then part of the principal balance can be withdrawn (interest is free – but is payable if the home is sold or refinanced)
#8: How do I know if my bank is participating? You can call your lender or servicer or visit the government website – homeaffordable.gov.
#9: What paperwork do I need to do to apply for the Obama loan modification plan? You will be asked to prepare a statement of your income and expenses (financial statements), document your financial situation, provide your payment, bank statements and tax returns. The information you provide on your financial statements can have a big impact on whether or not you get approved, so make sure you know how to fill it out correctly. Take the confusion and stress out of preparing your financial statements when you use Loan Mod Quick App software.
#10: What is the cost of this loan modification program? The plan is free – there are no application or eligibility fees. The Treasury Department is warning homeowners about paying any large fees to anyone.
This information is a basic outline of who may qualify, but borrowers are encouraged to take the time to learn more about how to properly prepare your application to increase your chances of success. The system uses a 4-step process to determine who is eligible. You can learn this same formula and use it to prepare your acceptable adjustment proposal. Don’t miss your chance to lower your monthly mortgage payment.
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