The financial condition of people in the U.S. is under tremendous pressure mainly because of the recession. It has not only lowered the economy of the country, but has left most of the citizens jobless as well as homeless.
As a result folks are falling behind on their mortgage payments resulting in home foreclosure. People who are not able to pay their debts are on the brink of losing their homes. To overcome this problem, President Barack Obama has come up with a loan modification program.
The loan modification plan works by reducing homeowners mortgage payments and providing the homeowners the opportunity to reduce excessive late fees and balance accrual.
How it works?
1. Interest rates and cap:
The homeowners interest rate may be reduced to 2-6% for qualifying hardship.
2. Principal reduction:
Principal reduction is used to lower the balance thus resulting in lower payments. The loan modification reduction is based on current market value and is not guaranteed by the Obama plan. Each case is unique based on hardship.
3. Reduced monthly payments.
To reduce a homeowner's monthly payments on mortgage, the finance department will join hands with other firms to achieve this objective.
The Obama administration has attempted to lower the qualifications to 38% of the homeowners monthly income.
4. Lenders incentive to modify:
The homeowner stability plan provides lenders with a $1000 incentive to reduce their mortgage payments and qualify them for loan modification.
In addition, the homeowner will receive $1000 of principal reduction for the next 5 years as long as they make their payments on time.
5. Homeowners and successful loan modification:
The added benefit of this plan will permanently reduce the principal of the homeowners payments.
It is imperative the homeowner understands the loan modification plan and keeps all paperwork of approval.
Obama's plan for loan modification has been welcomed by homeowners who are facing difficulties to repay their loans and is proving to be a hit amongst homeowners, who are on the verge of home foreclosures.
Author Resource:
Anthony Flores is a recognized authority in http://www.modificationnetbranch.com and loan modification processing questions .Visit our site to see if you qualify for loan modification today!
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