By Laura Gutmann on February 9, 2010
.jpg.aspx?width=75&height=75) According to the U.S. Department of Housing and Urban Development (HUD), “a loan modification is a permanent change in one or more of the terms of a mortgagor's loan, allows the loan to be reinstated, and results in a payment the mortgagor can afford.”1 In other words, loan modification may be an option to help you restructure your mortgage and prevent you from losing your home. This term has gotten some buzz lately, because of the Obama administration’s new plan to help homeowners avoid foreclosure.
Under this plan, the government would help banks reduce monthly payments and interest rates, and offers them incentives to work with their customers to make keeping their home possible. This may also result in giving homeowners more time to pay off their loans – for example, extending their mortgage for several more years, to further spread out the payments. “Borrowers, meanwhile, can get up to $1,000 knocked off the principal of their loan each year for as many as five years if they make their payments on time.”2 If you are responsible about making payments on time, you will be rewarded. However, in order to qualify, you would need to document extreme financial hardship, in addition to owing less than $729,750, among other criteria.
The government has set up a website to help you determine if you qualify, and if this option make sense for you. You should be aware that these resources are available free of charge. You should avoid organizations that charge you a hefty fee to help you modify your loan, as many of them are scams. If you need help navigating this process, you can always call 1-888-995-HOPE to get reputable information. The Department of Housing and Urban Development can also help connect you to foreclosure avoidance counselors at no charge.
You may determine your eligibility, although you should keep in mind that approval may also depend on the specifics of your mortgage, the assessed value of your home, and your ability to make the payments under the restructured plan. You will have to show proof of income to help support your ability to move forward with the loan modification.
|