Mechanics of the Home Loan Modification Program
It is also called by different names – restructuring or workout plan. Home loan modification is a recourse that a person may take in the event that he is unable to continue with his mortgage payments. He talks to his lender and negotiates for a change in the terms of the loan. This can result in permanent or temporary changes in some or all the components of the loan. The goal is to bring down mortgage payments at an affordable level.
Under the latest revision, this program “applies to borrowers who are unable to make — or are struggling to make — mortgage payments that exceed 38% of their monthly income. If the lender agrees to lower the interest rate or reduce the principal amount to bring the payment to 38% of the borrower’s income, the government will pay half of the additional cost to the lender to reduce the payment to 31% of the borrower’s income.” Not eligible are speculators – those who bought homes for investment purposes. All homes must be owner/occupied. Also, mortgages with amounts above the conforming loan limits will not be eligible.