President Obama has allocated $75 billion dollars for a loan modification program designed to help borrowers obtain a low, affordable mortgage payment.  The program is called “Making Home Affordable Modification” and features financial incentives for lenders, servicers and borrowers who participate.  Designed to reach 5 million at-risk homeowners, this new loan modification program will use the following options to reach a target payment equal to 31% of the homeowners gross monthly income:

1. Reduce interest rate to as low as 2%
2. Increase loan term to 40 years
3. Forbear part of the loan balance-to be paid later when home is refinanced or sold
4. Forgive part of the loan balance-not mandatory and at each lenders discretion

Obama’s new loan modification program is aimed at qualified homeowners who meet certain approval requirements.  Borrowers will have to complete loan modification application forms and prove that they meet these requirements:

1. Must live in the home as your principal residence
2. Loan amounts of $729,750 or less (higher for 2-4 unit loans)
3. Residential properties of 1-4 units
4. Have a current mortgage payment that is greater than 31% of your gross monthly income (including taxes, insurance and HOA if applicable)
5. Loan must have been originated prior to January 1, 2009
6. You may not be in bankruptcy
7. Homeowners can be delinquent or current on their home loan to qualify

Obama’s loan modification plan calls for a 3 month trial modification period at the new interest rate and payment.  If you make those payments on time, your lender will convert it to a permanent loan modification agreement.  Homeowners must agree to have their taxes and insurance escrowed (included in the monthly payment), even if the previous loan was not escrowed.

The Making Home Affordable Modification will then continue for 5 years at the low interest rate and payment.  During this time, homeowners will receive a Pay for Success payment in the form of $1000 per year that is applied directly to the loan balance, as long as they do not fall behind on the loan payments.  Beginning in year 6, the rate can increase 1% per year, until it reaches the cap rate indicated in the original agreement-to a maximum of market rate.

Homeowners who wish to apply for this new loan modification plan should take the time to learn how to compute their debt ratio, and determine their new target payment to verify if they are a good candidate.  Lenders are not required to participate in the loan modification program, but with the generous financial incentives offered, most are expected to come on board.  You can find out if you qualify and if your lender is one of the participating banks with the information provided for you in The Complete Loan Modification Guide.  Homeowners can get a jump start on the loan modification paperwork, learn how to pre-qualify themselves and increase their chances for approval by taking the time to do a little homework before contacting your bank.  It’s simple-when you prepare ahead of time, you can get the results you need much faster and with a greater chance of success.

The Treasury Department has warned homeowners against paying anyone to apply for the new loan modification program.  They have stated the program is free to homeowners, and strongly advised borrowers to avoid companies or individuals who ask for a large fee to assist them.

You can get the help you need to understand how to qualify and apply for the new loan modification program by ordering and downloading The Complete Loan Modification Guide. This is a low cost, easy to read handbook that will provide you with everything you need to prepare a professional and acceptable loan modification application. You are provided with all of the necessary forms and given detailed directions on how to complete them properly. The Complete Loan Modification Guide will take you step by step through calculating your debt ratio, completing the financial statements, writing your hardship letter and then putting it all together to submit to your lender. Get started today on the path to secure home ownership, order and download The Complete Loan Modification Guide. For more information about mortgage loan modification, please visit us at: http://www.myloanmodificationcenter.com