Federal Mortgage Assistance Programs - Know The Details

Homeowners who are not able to make their monthly mortgage payments due to the financial hardships will become eligible for the federal loan modification program or HAMP. Federal mortgage assistance plan is an element of the Obama Administrations Making Home Affordable Refinance Program. Millions of borrowers who are current, but having difficulty making their payments and borrowers who have already missed one or more payments may be eligible for HAMP.

Mortgage loans backed by Fannie May and Freddie Mac

Banks and other lending companies that offer home mortgage loans may hesitate to a loan modification. Usually a mortgage servicer will do the best of his interest. They may feel that if a homeowner is current on their monthly payments there's no need for a loan modification. They may also feel that it's in their best interest to foreclose on a property rather than modifying a loan. If the current mortgage is owned or guaranteed by Freddie Mac or Fannie May, the mortgage servicer is mandated by the Federal Government to participate in the Home Affordable Modification Program. This means that the mortgage servicer must offer a loan modification process to homeowners that are eligible for the program if Freddie Mac or Fannie May owns the loan. A mortgage service can still participate in HAMP if the loan is not controlled or guaranteed by Freddie Mac or Fannie May, although participation is not necessary.

The following factors are the minimum elements necessary to be eligible for home affordable modification program:

• The mortgage loan must be for the homeowner's primary residence.
• The amount of the loan should be $729,750 or less.
• The payment on the first mortgage must be more than 31% of the homeowner's gross income. This includes principal, interest, insurance, taxes, and HOA fees.
• The mortgage must have been originated prior to January 1, 2009.
• If the account is not in default, the homeowner must be able to demonstrate imminent default, which can include providing proof of a financial hardship, job loss, etc.

In order to reduce the monthly payments equal to 31% of the homeowner gross monthly income, the interest rate for home affordable modification program can go down to 2%. You can also enlarge the loan to 40 years, although it is not compulsory. As per the circumstances, a balloon payment is the best option to the modification.