While loan modifications are more common during this economic downturn, they have long existed as an option for homeowners facing financial difficulties. With so much media attention on the subject, people need to be able to separate the truth from the false information on the topic of home loan modifications.
A new federal law has standardized the method by which lenders qualify and approve loan modifications for homeowners facing financial difficulties. This legislation came out of the Making Home Affordable (MHA) Plan which the Obama Administration turned into law. The MHA plan offers homeowners the opportunity to apply through the end of 2012 to modify their home loans.
The MHA plans to assist between four and five million financially strapped homeowners modify their mortgage loan payment terms with $75 billion that has been set aside for this program. Foreclosure is the least desirable option of both the homeowner and the mortgage lender, so loan modifications are a better option for both parties.
Despite what some people may have heard or think, the government is not forcing lenders who do not want to participate to take part in this plan. There are incentives for banks that choose to participate in the loan modification program and certain procedures that have to be followed, but a mortgage lender does not have to participate in the federal program if it does not desire to do so.
Because foreclosure is never in a lender’s best interest, most mortgage banks are as eager to participate in the federal loan modification program offered under the MHA plan as are the homeowners who are facing financial difficulty.
Because the federal loan modification program has requirements such as only applying to first mortgages on the lender’s primary residence, real estate investors or speculators can’t participate in this program. The purpose of the MHA is to allow homeowners from losing their homes and not to help house flippers get financing to acquire new properties.
As the MHA program reaches out to more homeowners facing financial difficulties, more information will spread to dispel the rumors and misconceptions about the federal loan modification program. It’s common to be wary of something new.
The Making Home Affordable plan can be a welcomed answer for homeowners in fear of losing their houses to foreclosure. Before writing it off as a possibility, get more information about how you could reduce your monthly mortgage payment through a home loan modification.