The Obama Administration implemented the "Making Home Affordable Program" to help homeowners who are facing foreclosure. The program provides incentives to participating banks, lenders, and servicing companies to enter into modification plans with homeowners to get them back on track.
You may qualify if you own and occupy your home; it is a one to four unit home; the first mortgage was originated on or before January 1, 2009; and your monthly mortgage payment, including taxes, insurance, and home owners association fees is greater than 31% of your gross monthly income. There are also limits on the amount that you owe; for a single family home the unpaid principal balance must be equal to or less than $729,750. You will need to document a financial hardship, such as loss of job, divorce, increased medical expenses, increased monthly expenses, or other reasons.
The program will reduce your monthly mortgage payment to 31% of your current gross monthly income. You will be required to make this payment for a trial period, usually three months. Then, if your financial situation has not changed, the lender should make the trial period into a permanent modification. They reach the 31% figure by reducing the interest rate to as low as 2%, extending the maturity date out as long as 40 years, or forgiving a portion of the principal balance. The investment company on each loan does have a say in which of those options are used. Some avenues, such as reduction of the principal balance, will not be considered. However, the program does offer a variety of incentive payments to the investors to try to make the mortgage payment equal reach 31% of the borrower's gross monthly income.
The plan I just described is to modify a mortgage that is between 1 and 12 months past due to avoid foreclosure. There is also a refinance program available for people who are not yet 30 days late on their mortgage payment and owe up to 125% of the value of their house.
For further information visit http://www.makinghomeaffordable.gov, or give me a call. I've helped many people resolve foreclosure actions, through workout plans, short sales, or even bankruptcy. I may be able to help you too.
