Obama federal loan modification plan specification

The Obama's federal loan modification plan of $75 billion has helped the struggling homeowners who are facing financial hardships and it has helped people to avoid foreclosure. The goal of this plan is to help 5-6 million families to get a lower mortgage payment so they can affordable stay in their homes. There are certain requirements which a person needs to fulfill to get approval for this plan.

General guidelines for federal loan modification program

• Homeowner should live in the property as a primary residence
• Loan should not be originated before January 1, 2009
• Must show the financial hardships
• Must be able to give the proof of income
• Current mortgage payment must be greater than 31% of the gross monthly income

Below given are the primary features which well- qualified homeowners would be allowed

• Reduced interest rate as lower as 2%
• Loan term extension to 40 years
• Major reduction with the government, dividing in the costs with the creditors

Formula which lenders use to qualify the homeowners?

• Target payment is obtained by multiplying the gross monthly income with 31%
• Minus the monthly cost of homeowners like the property taxes, insurance and homeowners dues and that is the new principal and interest payment
• Reduce the interest rate as low as 2% by using the current loan amount and extend the term up to 40 years.

The federal government is offering incentives, $500 payments to the services and $1500 to the lenders who offer loan modification programs to their borrowers. Additionally the homeowners who are current on their new modified loan are given incentives for each year if they remain current which total up to $5000 at the end of 5 years. This incentives are beneficial to both the parties the lender as well as the borrowers. Lender approves a borrower for loan modification because of the incentives which is provided to him and the borrower does his monthly payments on time to build his credit score and avail the incentives.

A homeowner understands the paperwork which is needed to be submitted to the lender and they need to complete the paperwork properly, so that the loan modification application is processed fast. One can also use the same formula which a lender uses to qualify oneself and adjust the budget, before the bank or the financial organization reviews the application. One should always know to figure out his debt ration settle on his new payment. This is vital because one can easily make the necessary adjustments to his monthly budget and fit in the guidelines.

One can take advantage of the software program to mimic the federal guidelines to check his prepared applications, this will lessen the burden and the loan modification would be done faster. One just has to input the monthly expenses and the monthly income and other calculations are done automatically. The debt ratio, new interest rates, target payment, disposable incomes etc are automatically calculated. Thus one can do these things and save his time and money both. The Obama federal loan modification program of $75 billion has helped the homeowners who are facing financial hardships and have helped them to avoid foreclosure. There are certain guidelines which a person needs to meet to avail this program.