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What Is Obama’s Mortgage Modification Plan?

By Bob Redtree

In light of the current present global economic crisis, people want to know: Just exactly what is Obama’s mortgage modification program?

While the global conditions of the economy are a major askance at many press conferences, citizens are asking what we can do to improve the housing financing area here at home, and the Obama administration seems to think they have an answer in the Loan Modification Program that they are proposing.

What The Program Is.

If enacted, this program will restructure mortgages to make the monthly payment more affordable to the borrower. It will in essence, reduce the monthly payment to 38% of the borrowers monthly income, and add an additional 7% reduction through government subsidies. The total monthly payment will be no more than 31% of the monthly income.

How Does The Loan Modification Program Reduce The Payment?

First the lender must reduce the interest, to as low as 2% in some cases. If this doesn’t satisfy the 31% stipulation, then the terms of the loan can be extended, going up to 40 years. If this still doesn’t satisfy the requirements, the lender will then forbear portions of the interest, although a reduction in the principal is not required.

Why Would A Lender Agree To Obama’s Mortgage Modification Program For My Loan?

Under Obama’s mortgage modification plan, lenders will receive $1,000.00 for each modified loan, an additional $1,000.00 for every year the payments are made, up to 3 years, and you will get $1,000.00 removed from the principal every year you make all your payments on time, for up to 5 years. A potential $9,000.00 is a big incentive.

The Conclusion?

There is much more to this, there is an upper limit on how much your house can be worth, and you must demonstrate that you are having financial hardships, among the requirements. There are also provisions to protect the lenders, but for the most part this is a plan that has been well received among the finance community.

Related posts:

1. What Is Mortgage Modification?
2. Can A Mortgage Rate Home Modification Help My Debt Problem?
3. What Is A Mortgage Loan Modification?
4. Can A Mortgage Rate Home Modification Stop Foreclosure?
5. Can A Restructured Mortgage Include An Interest Rate Reduction?