Financially strapped homeowners may be able to get help under President Obama’s Home Affordable Plan.  Depending on your circumstances, you could be eligible for one of the three options offered and funded by the Treasury Department.  $75 billion dollars has been allocated to help stop the foreclosure crisis, and you may qualify for help under this loan modification program.  Learn the options and find out which one could benefit you.

Home Affordable plan option #1 is a refinance plan that gives borrowers the opportunity to take advantage of the current low interest rates by refinancing their current loan.  In order to qualify for this plan, you cannot be late on your mortgage payments and you cannot owe more than 105% of the homes current market value.  This part of the program only applies to your first trust deed, and if you have a second loan that lender must agree to the transaction.

Home Affordable plan option #2 is a loan modification program that will offer qualified homeowners

Federal Plan

interest rate reductions down to 2%, loan terms extended to 40 years and finally some principal deferral on their first trust deeds.  The goal is to reach a target payment that equals just 31% of your gross monthly income.  If you have a second loan on your home, the plan now mandates a modification to that loan as well with interest rates down to 1% or 2%, and in some cases the debt may be retired entirely.

The Treasury Department is paying the lender for each successful modification, and borrowers who are able to maintain the new modified payments will also be paid up to $6000 over the next 5 years.  If you do not qualify for the refinance plan because you are delinquent or you owe too much on your home, the Home Affordable Modification may be a good option for you.  Make sure you understand the approval criteria and prepare your application before calling your lender to apply.  This is a one-time chance and you want to make sure you know how to qualify so you don’t make a mistake.

Home Affordable option #3 is a short sale or deed in lieu of foreclosure.  This part of the plan is called HAFA for Home Affordable Foreclosure Alternative.  The federal government will now pay lenders $1000 for allowing a sale where the proceeds are less than the amount owed on the property.  This streamlined short sale process with help homeowners with an exit strategy that will not be so damaging to their credit.  The government will also share the cost of eliminating second liens on the property.  If the short sale does not work, the the homeowner can turn over the keys and transfer the home without a foreclosure process.  The borrower could then be eligible for  $1500 or more in relocation expenses.

All of these options have monetary incentives that encourage lenders to work with borrowers and find a solution quickly.  Even so, not all borrowers will qualify for these options.  If you are facing financial difficulty, find out more about the programs and how you could qualify for help.  You must invest some of your time and effort to learn and prepare before contacting your lender if you hope to be successful.  The government is encouraging homeowners to work directly with their lenders and discouraging loan modification companies who charge large fees to assist borrowers.  You can get help-if you know how to get it.  Start now to learn and prepare so you can get back on track.

You will be asked to prepare a HAMP application, which will include a hardship affidavit and financial statement.  Your monthly income and debts will be reviewed and based on a formula that is used to determine who qualifies, you will be told yes or no.  You can increase your chances of getting a loan modification by learning this formula and then using it yourself to prepare your own acceptable loan workout application.  If you are unsure about how to do this, take advantage of a software program designed just to help homeowners apply and qualify.

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