Because of current economic problems, many Americans have struggled meeting mortgage payments, and more are facing dangers of being charged with loan evasion. The government has started working on this problem by creating new plans to keep you in your homes. One of two plans is the Federal Mortgage Loan Modification Plan which is expected to be passed by the Congress.
Following are a few requirements needed in order to qualify for this program:
- Your primary mortgage must not go beyond $729,500.
- Your mortgage has been implemented before January 1, 2009.
- The property you are residing is your primary residence.
- You are required to provide income tax with returns and receipts.
- You must write a financial hardship letter using your own handwriting and signature.
- You must agree to have credit counselling if household debts go beyond 55% of your total income.
Strengths of the Federal Mortgage Loan Modification Plan:
- Your lender can decrease monthly payment to prevent it from exceeding 31% of your total income.
- Your lender can reduce rates of interest as low as 2%. However, an interest rate of approximately 4.5% is more common.
- You will not be charged any fee related with loan modification.
- If you recently have very low payments, your lender can create a balloon payment afterwards.
- Balloon payments should be paid completely in case of refinancing, property selling, or full payment of the loan.
- If you consistently pay on time, the government will probably reduce your loan’s principal value over 5 years.
- After 5 years, interest rates may again increase. Remember that this loan modification is temporary, but aims to help in financial struggles.
What if in case you have been paying on time and then your home’s value suddenly dropped, and the bank refuses to give you a loan modification? The government has addressed this problem by creating the Refinancing Option of the Federal Mortgage Loan Modification Plan.
- The property must be a primary residence.
- Your income can meet payments for the new mortgage.
- You cannot demand cash refunds to pay debts.
- Fannie Mae or Freddie Mac should be your loaners.
- Interest rates depend on current market rates.
- Fixed interest rate at a 15 or 30-year term.
- Interest rates can be reduced for the first 5 years of your loan.
Appraisals are important in qualifying for these plans. If your house appraises below requirement of the plan your loan will not be modified.