The $75 billion program pays lenders to modify the mortgages of troubled borrowers, typically lowering their payments by about $500 a month.

But so far, fewer than 200,000 borrowers have received a permanent change to their loans, according to Treasury Department data released Wednesday, a small fraction of the 3 to 4 million borrowers who government regulators initially said the program could help before it expires in 2012. That may not bode well for efforts to stabilize the housing market. Credit Suisse has estimated that 3.2 million foreclosures would have to be prevented this year for home prices to rise modestly.

“Clearly the numbers that were discussed by the administration set up an expectation that just don’t deal with the reality we’re in,” said John Courson, president of the Mortgage Bankers Association.

Administration officials have acknowledged that the program, known as Making Home Affordable, got off to a slow start and has yet to reach its full potential. Many lenders didn’t begin enrolling borrowers until last summer, months after the program was launched. By then, the primary cause of foreclosures had shifted from the risky mortgages that helped spur the financial crisis to rising unemployment. The latter is tougher to address because jobless borrowers often have little money with which to pay any type of home loan.

Through January, nearly a million borrowers had gotten at least some reduction in their mortgage payments as part of the program, but more than three-quarters have yet to win a permanent modification and must still prove they qualify, according to Treasury data. The program “is doing the job it was designed to do, Phyllis Caldwell, chief of Treasury’s Homeownership Preservation Office, said in a statement. “Struggling families are receiving payment relief and the housing market is showing signs of stabilization.”

The unemployment factor

But the administration is facing demands to expand the program to help more unemployed borrowers, or to lower the loan balance of underwater borrowers — those who owe more than their home is worth. Rep. Edolphus Towns (D-N.Y.), chairman of the House Oversight and Government Reform Committee, has launched an investigation into the program. “While I applaud Treasury’s efforts, numerous concerns have been brought to my attention regarding the effectiveness and efficiency of the MHA program and the extent to which it has assisted struggling homeowners,” he wrote to Treasury Secretary Timothy F. Geithner earlier this month.

More than half of those who have received mortgage relief so far have said they needed it because they’ve lost their jobs or had their income drop for some other reason. But many unemployed borrowers can’t qualify for help because they don’t have enough income. Housing advocates argue that some of the billions of dollars set aside for the loan modification program should be diverted into short-term loans for these borrowers.

And underwater borrowers who have little chance of recouping the lost value of their homes need a more generous program, housing advocates say.

Changes to the program are possible, administration officials have said, but it is unclear how extensive they will be.

No appeals process

Another challenge for borrowers is that the program lacks a formal appeals process for those denied relief, leaving homeowners largely to work out problems on their own.

That has been the challenge for Alice Valentine, a Southeast Washington homeowner who had a decrease in income after a work-related injury. When she first sought a loan modification from Bank of America, she was told she qualified, Valentine said. But the promised forms she needed to fill out never arrived, she said.

“I never received anything in writing from them except for threatening letters,” Valentine said. “I have been getting nothing but the runaround.”

So she wrote to the White House instead. President Obama responded, offering encouragement. “The road ahead is difficult, but if we move forward resolutely, then I am confident we will overcome this crisis,” Obama wrote.

A Bank of America spokeswoman said the bank is following the program’s guidelines. “We apologize if there was any miscommunication. We would like to reevaluate her eligibility once her financial situation improves,” said spokeswoman Jumana Bauwens.

The program encourages lenders to modify mortgages by offering them a series of incentive payments. But these payments may not be enough to shift the financial calculations made by lenders before offering mortgage relief. “It is clear the incentives being paid are nowhere close to reimbursing the servicers for the cost and expenses that they are devoting to modifications,” said Courson of the Mortgage Bankers Association.

‘Set up to fail’

Some lenders have sold the loans they made to investors under contracts that restrict modifications. In addition, about 600,000 delinquent borrowers potentially eligible for the program can’t apply because their servicers have not signed up, according to Treasury data.

When Yvonne Gipson, 69, applied for relief on the loan for her Annapolis home last year, she was told by her mortgage servicer, PNC, that her loan had been bundled into a security with other loans by Goldman Sachs, she recounted. PNC informed her that the rules governing that security did not allow the loans to be modified, she said.

Instead, wanting to see her catch up, PNC suggested it could raise her monthly payments. The new payments would consume 66 percent of her income, more than double what would be offered under the federal program. “I was being set up to fail,” she said. “I am trying to do the right thing. I find the whole thing devastating.”

PNC declined to comment and Goldman Sachs said the loan can be modified.

Despite its slow start, the federal program has established industry standards for the types of loan modifications borrowers should receive. So far, borrowers who receive loan modifications under the program are less likely to re-default than those who get help under other mortgage relief programs. About 25 percent of borrowers in the program were delinquent on their new lower payments, according to the Treasury Department, while about half of borrowers in other mortgage relief efforts fall behind again.

But more borrowers in the federal program could re-default later. More than 60,000 of the borrowers who initially enrolled in the program have already failed out.

Part of the problem is that the financial burden on many borrowers extends beyond their primary mortgage to other types of debt. The federal program focuses only on lowering the payments on a primary mortgage to affordable levels, or about 31 percent of income. But even after a modification, many borrowers still have high levels of debt, and federal regulators also want to bring down the payments for second loans, such as home-equity lines. Since announcing the expansion of the program to second liens last April, just one lender, Bank of America, has signed up.

Article Source: Washington Post

Full Disclosure:
When either just describing or encouraging loan modification, the servicer shall give the debtor information that will aid them in understanding the terms of the modification and the process of modification, and debtors should also be given written information about the costs, terms, and risks of modification that is clear and concise. This should be given in a timely manner as to allow debtors to make an informed decision.

Fair Lending:
Modifications under the plan must abide by the Equal Credit Opportunity Act and the Fair Housing Act, both of which do not allow discrimination on a prohibited basis connecting to mortgage transactions. Loan modification plans are subject to fair lending laws, and both servicers and lenders should make sure debtors are being treated equally when it comes to mortgage modification.

Consumer Complaints and Questions:
Servicers should have a system to answer complaints and questions regarding loan modification timely and appropriately, and that every question and complaint is taken seriously and answered appropriately.
This protection will ensure that you and your family are not treated unfairly and can receive the full benefits a mortgage modification.

Article Source: Loan Store

Lenders use special codes to let credit bureaus know what customers are borrowing and whether they’re paying on time. When the loan modification program, which lowers mortgage payments for homeowners who are behind in their payments or in danger of imminent default, was announced in February, lenders used an existing code, called AC, to signal that borrowers were participating in the program.

The problem for those borrowers, however, was the fact that the AC code signals that a consumer has made only a partial payment. That often had a significant impact on the scores of borrowers with good credit who had made all of their payments on time. A Treasury Department spokeswoman estimated that their scores could fall from 30 to 100 points, depending on other information in their credit file .

Why use an old code? The AC code was the closest fit, so the Consumer Data Industry Association recommended using it until it could develop a new one.

One Bank of America executive, for instance, confirmed in this recent New York Times article, that it reported borrowers who made timely payments before and after agreeing to loan modifications as making only partial payments. Presumably, the bank used the AC code, which damaged the credit of many borrowers.

But recognizing that participating in the modification program alone need not harm credit scores by default, the trade association, in cooperation with the Treasury Department, developed a new code, which took effect in November. “The administration felt that it was important to ensure that homeowners who faced foreclosure weren’t unfairly punished for seeking a loan modification,” said Meg Reilly, spokeswoman for the Treasury Department.

The new CN code signifies a loan modified under a federal government plan. It will have no impact on credit scores in the near future.

But will it ever? That depends on whether FICO, which creates the most popular credit score formulas for credit bureaus like Equifax, Experian and TransUnion, concludes that its appearance in a credit file is somehow predictive of late bill payments or other bad behavior. For what it’s worth, the old AC code is correlated with delinquencies and such.

“Our first opportunity to study the predictive value of the new CN special comment code will come later this year, after one of the national credit reporting agencies sends us a new sample of consumer credit reports for our use in redeveloping our scoring models used by that agency,” said Craig Watts, a FICO spokesman. As a result, the FICO scoring formula ignores the CN code in the near term.

Still, the new code is separate from current information about whether borrowers are delinquent on their payments or not. So borrowers with the CN code on their records that pay late will still see their credit scores fall.

In addition, the lenders themselves ultimately decide whether to use the new code. That said, industry best practice is to follow the guidelines, because it’s in all lenders’ best interests to have as much information as possible about potential borrowers, said Norm Magnuson, spokesman for the reporting trade association. For instance, a Bank of America spokesman said Monday that the bank is complying with the guidelines.

As a result, the exact impact of a loan modification on a credit score does depend on several factors as outlined here. (Check here for more details on how a person’s credit report information can influence the score and check here for other advice on improving a low credit score.)

As for those who are current on their payments and were in a trial mortgage modification before the new code was adopted in November (and thus got the “AC” black mark), Mr. Magnuson said the guidelines did not address such retroactive status. But Ms. Reilly, the Treasury Department spokeswoman, said the AC code would eventually be dropped for such people.

Ideally, banks themselves will replace the old code that damages credit scores with the new one that doesn’t (yet). If they don’t make the fix, borrowers should call and request it and file disputes with the credit bureaus asking for a correction of credit reports that have the old code.

But shouldn’t people with modified loans who never missed a payment not suffer a credit score decline under any circumstances? Industry experts believe that some mark is necessary. The reason: those getting the modifications in the first place probably pose more risk to future lenders, given that the mortgage modification program was devised to help people whose money problems make them vulnerable to foreclosure. “They are having financial difficulty, so there is some risk involved,” said Mr. Magnuson.

Do you think people getting loan modifications should escape a black mark? Why or why not?

Author: JENNIFER SARANOW SCHULTZ

If you have a decent credit score and you have equity in your home then there is a good chance that you can refinance to a much lower mortgage interest rate. It is extremely important that you have some equity in your home. Many people have tried to refinance and they have found that their home value is much lower than they expected. This is causing it to be very difficult to get through the refinance appraisal step.

It is also extremely important that you have a credit score of 680 or better to get a very low mortgage interest rate. If you have bad

credit and little equity in your home then you might want to consider the home loan modification process because it is not likely you can refinance to the advertised low mortgage rates. For more information on the home loan modification option make sure to check out the Making Home Affordable website.

The Making Home Affordable website is quite extensive so make sure you plan to spend several hours and possibly even a few days on this website. You could honestly sit on this site for hours and still not look at all the data that is available for free. If you do not understand all the financial terms then you might want to consider calling a HUD representative as they can help you with all your foreclosure assistance questions.

President Obama and his staff have worked very hard to help you stay in your home and avoid foreclosure. Make sure to take advantage of this opportunity and lock into a low mortgage interest rate or go through the home loan modification process. Either one of these options is likely to help you save your home and make life much more enjoyable.
If the current economy and your financial struggles have gotten you down make sure to check out the inspirational blog My Life After Retail. The blog is an account of the journey to find peace of mind and happiness in today’s society.
Author: Alan Lake

WASHINGTON – The U.S. Department of the Treasury and Department of Housing and Urban Development (HUD) today kick off a nationwide campaign to help borrowers who are currently in the trial phase of their modified mortgages under the Obama Administration’s Home Affordable Modification Program (HAMP) convert to permanent modifications. The modification program, which has helped over 650,000 borrowers, is part of the Administration’s broader commitment to stabilize housing markets and to provide relief to struggling homeowners and is a primary focus of financial stability efforts moving forward. Roughly 375,000 of the borrowers who have begun trial modifications since the start of the program are scheduled to convert to permanent modifications by the end of the year. Through the efforts being announced today, Treasury and HUD will implement new outreach tools and borrower resources to help convert as many trial modifications as possible to permanent ones.

“We are encouraged by the pace at which trial modifications are now being made to provide immediate savings to struggling homeowners,” said the new Chief of Treasury’s Homeownership Preservation Office (HPO), Phyllis Caldwell. “We now must refocus our efforts on the conversion phase to ensure that borrowers and servicers know what their responsibilities are in converting trial modifications to permanent ones.” In her new role, Caldwell will lead HPO’s conversion drive efforts.

“Encouraging borrowers to move through the process of converting trial modifications to permanent modifications remains a top

priority for HUD,” said HUD Assistant Secretary for Housing and FHA Commissioner David Stevens. “As a part of our continuing efforts to improve the execution of the HAMP program, HUD is committed to working with servicers, borrowers, housing counselors and others dedicated to homeownership preservation to improve the transition of distressed homeowners into affordable and sustainable mortgages.”

With tens of thousands of trial modifications being made each week, the Administration is now working to ensure that eligible borrowers have the information and the assistance needed to move from the trial to the permanent modification phase. (All mortgage modifications begin with a trial phase to allow borrowers to submit the necessary documentation and determine whether the modified monthly payment is sustainable for them.) As the first round of modifications convert from the trial to permanent phase, the Administration has identified several strategies for addressing the challenges that borrowers confront in receiving permanent modifications.

In addition to the conversion drive that kicks off today, the Obama Administration has already taken several steps to make the transition from trial to permanent modification easier and more transparent by:

Extending the period for trial modifications started on or before September 1st to give homeowners more time to submit required information;
Streamlining the application process to minimize paperwork and simplify the submission process; meeting regularly with servicers to identify necessary improvement to borrower outreach and responsiveness;
Developing operational metrics to hold servicers accountable for their performance, which will soon be reported publicly;
Enhancing borrower resources on the MakingHomeAffordable.gov website and the Homeowner’s HOPETM Hotline (888-995-HOPE) to provide direct access to tools and housing counselors.
The Mortgage Modification Conversion Drive will include the following:

Servicer Accountability. As part of the Administration’s ongoing efforts to hold servicers accountable for their commitment to the program and responsibility to borrowers, the following measures will be added:
Top servicers will be required to submit a schedule demonstrating their plans to reach a decision on each loan for which they have documentation and to communicate either a modification agreement or denial letter to those borrowers. Treasury/Fannie Mae “account liaisons” are being assigned to these servicers and will follow up daily as necessary to monitor progress against the servicer’s plan. Daily progress will be aggregated by the end of each business day and reported to the Administration.

Servicers failing to meet performance obligations under the Servicer Participation Agreement will be subject to consequences which could include monetary penalties and sanctions.

The December MHA Servicer Performance Report will include the data on permanent modifications as well as the number of active trial period modifications that may convert by the end of the year if all borrower documents are successfully submitted, sorted by servicer and date.

Servicers will be required to report to the Administration the status of each modification to provide additional transparency about situations where borrowers face obstacles to moving to the permanent phase.

Web tools for borrowers. Because the document submission process can be a challenge for many borrowers, the Administration has created new resources on www.MakingHomeAffordable.gov to simplify and streamline this step. New resources include:
Links to all of the required documents and an income verification checklist to help borrowers request a modification in four easy steps;

Comprehensive information about how the trial phase works, what borrower responsibilities are to convert to a permanent modification, and a new instructional video which provides step by step instruction for borrowers;

A toolkit for partner organizations to directly assist their constituents;

New web banners and tools for outreach partners to drive more borrowers to the site and Homeowner’s HOPETM Hotline (888-995-HOPE).

Engagement of state, local and community stakeholders. Through the conversion drive, the Administration is engaging all levels of government – state, local and county – to both increase awareness of the program and expand the resources available to borrowers as they navigate the modification process.
HUD will engage staff in its 81 field offices to distribute outreach tools. HUD will also encourage its 2700 HUD-Approved Counseling Organizations to distribute outreach information to participating borrowers.

By engaging the National Governors Association (NGA), National League of Cities (NLC) and National Association of Counties (NACo) the Administration is connecting with the thousands of state, local, and county offices on the frontlines in large and small communities across the country who are hardest hit by the foreclosure crisis. These offices will now have the tools to increase awareness of the program, connect with and educate borrowers and grassroots organizations on how to request a modification and take the additional steps to ensure they are converted to permanent status; and serve as an additional trusted resource for borrowers who are facing challenges with the program.

In partnering with the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, state regulators will now have enhanced tools to assist borrowers who are facing challenges in converting to a permanent modification and to report to the Administration on the progress and challenges borrowers and servicers are facing on the ground. Regulators will also be empowered to work directly with escalation and compliance teams to ensure that HAMP guidelines are consistently applied.

More information about the Obama Administration’s mortgage modification program can be found at www.MakingHomeAffordable.gov.

Let us know what you think…

The problem the Administration is out to tackle is related to the structure of the Home Affordable Modification Program (HAMP). The first three months of a mortgage rewrite are something of a probation period— and very few homeowners are making it out of that trial. More than 650,000 borrowers have been placed in trial modifications, but as of September, fewer than 2,000 had become permanent. (See pictures of the faces behind the foreclosures.)

On Nov. 30, the departments of Treasury and Housing and Urban Development announced that they would no longer take kindly to mortgage firms that don’t make modifications lasting. Teams of officials are headed to the nation’s largest lenders for a closer look at what’s going on, and starting in December public progress reports will include the number of loans being converted to permanent status — an attempt to shame the firms into quicker action. Monetary penalties could follow.

For all the effort being spent on whipping companies into shape, though, there is much less energy going toward addressing the changing nature of foreclosure. HAMP was crafted to deal with the effects of the housing bubble: excessively easy credit let people buy homes they couldn’t really afford and often with loans that carried spiking interest rates and payments.

The major difficulty now is the weak economy and rising joblessness. Under the U.S. government’s plan, a modified loan payment must not account for more than 31% of a family’s income. With unemployment north of 10%, in a growing number of cases, the mortgage isn’t the problem — the lack of a paycheck is. “It increasingly appears that HAMP is targeted at the housing crisis as it existed six months ago, rather than as it exists right now,” concluded the Congressional Oversight Panel, a group charged with evaluating the program, in an October report.

That’s not to say there aren’t real issues with how trial modifications are (or aren’t) being converted into permanent ones. Housing counselors report that while loan servicers have made progress in certain areas — phone-wait times that used to run up to an hour now might last only 15 minutes — there are still major bottlenecks in getting the final sign-off for a permanent modification. And borrowers are not without fault. Some 375,000 homeowners should be eligible for permanent modifications by the end of the year, according to the Treasury Department, but some 20% of them haven’t provided any of the documentation necessary to complete the process, and twice as many have parts of their paperwork missing. (Read “Q&A: The Outlook for Home Foreclosures.”)

Still, the larger storm cloud on the horizon is the state of the jobs market. While an out-of-work person can, theoretically, get a loan modification under HAMP by proving eligibility for at least nine months of unemployment benefits, the program isn’t set up to handle someone without a regular stream of income.

Elsewhere, such programs do exist. For example, under the auspices of the Homeowners’ Emergency Mortgage Assistance Program, Pennsylvania will loan its residents up to $60,000 over the course of two years in the wake of life events such as losing a job or falling severely ill. While a homeowner is out of work, the loan is interest-free. In exchange, the state gains a legal right to the house should the owner default on his or her mortgage.

Rising unemployment isn’t the only dynamic HAMP fails to thoroughly take into account.

Another is the changing behavior of people who owe more on their mortgage than their house is worth. According to a recent analysis by the credit bureau Experian and the consultancy Oliver Wyman, nearly 600,000 borrowers might have intentionally defaulted on their mortgages in 2008, twice as many as the year before. The social norm that in previous eras would have prevented people from simply walking away from their homes seems to be eroding — but HAMP puts a low priority on reducing the overall amount a person owes. In fact, among permanent modifications, the average loan amount as compared to home price (the so-called loan-to-value ratio) has increased.

The other big gap in HAMP is the way it deals with— or fails to deal with — people who wouldn’t be in a position to keep their houses even with a modification. Emily Jones, a manager at Neighborhood Housing Services in Boise, Idaho, says about half of all people who walk into her housing-counseling agency fall into that camp. “The goal isn’t to keep the home in every situation,” she says. “The goal is to avoid foreclosure, and in a lot of situations, it’s not in the client’s best interest to try to keep the home and only postpone the inevitable.” (Read “FHA: Housing’s Safety Net Begins to Fray.”)

And yet the part of HAMP that would most work to help these people has been incredibly slow to get off the ground. Back in May, the Treasury Department announced that it would issue guidelines on how lenders might speed up dealing with borrowers who simply want to hand back the deed to their house or sell their home for less than is owed on the mortgage (a so-called short sale). Distressed homeowners and housing counselors have long complained about short sales being scuttled by lenders that take too long to respond to a potential buyer’s offer. The plan to beef up the process for these sales, originally announced in May, wasn’t unveiled until Nov. 30 — and doesn’t go into effect until April 5, 2010.

Is there harm done in the government’s leaning on mortgage companies to make trial modifications permanent? Probably not. But there are plenty of other foreclosure-related problems out there that could use some attention too.

Article Source: Time
Read more: http://www.time.com/time/business/article/0,8599,1945176,00.html#ixzz0Yg9GXEWl

Pres. Obama suggested that he wanted 4 million homeowners to benefit from the making home affordable plan by the end of 2010. Unfortunately, there is no way this is going to happen as there are only 650,000 homeowners in the trial. For the home loan modification program. What is also unfortunate is the fact that very few of these homeowners have been given permanent home loan modifications.

At this point, many homeowners are finding it very difficult to find the paperwork they need to continue their home loan modification and make it permanent. Lenders are actually hiring individuals to help homeowners to find this paperwork and submitted to them on time so they can modify their mortgages permanently.

If you feel you could benefit by the home loan modification program you might want to do your research. The making home affordable website is a great resource to use not only for home loan modification but for refinancing and buying a home in general. Please be aware that it takes a lot of work from the homeowner as well as the lender to get this home loan modification process underway and working properly.

Do you have any questions about the process make sure to contact HUD representative as they can explain most of it in great detail. Please understand that these representatives are quite busy as many Americans are trying to modify their current home loans. It would greatly behoove you to take the necessary steps to avoid foreclosure by modifying your home loan today.
If the current economy and your financial struggles have gotten you down make sure to check out the inspirational blog My Life After Retail. The blog is an account of the journey to find peace of mind and happiness in today’s society.

Author: Tiffany Mann

The Obama administration plans to announce on Monday efforts to step up pressure on lenders participating in its massive foreclosure
prevention program in a push for transparency that should provide new details about the industry’s performance.

The $75 billion federal program, known as Making Home Affordable, got off to a slow and frustrating start, but the administration has recently noted that more than 650,000 borrowers had signed up for it. Now the program, which lowers mortgage payments to 31 percent of a person’s income, is facing questions about how many of the enrolled borrowers are actually qualified to receive its assistance.

A recent report by the Congressional Oversight Panel, which is monitoring the government’s Troubled Assets Relief Program, found that fewer than 1 percent of borrowers in the program had moved from an initial trial modification into a permanent one. Borrowers must make three payments and provide extensive documentation to convert into a permanent loan modification.

Homeowners and consumer advocates have complained that even after submitting and resubmitting information, some borrowers have been told, with little or no explanation, that they do not qualify for the program after all.

The Treasury Department already releases monthly reports on how many trial loan modifications lenders have completed. It has shown, for example, that some major lenders such as Bank of America have lagged behind competitors in signing up borrowers to the program. But beginning in December, the report card will also detail how many of the borrowers that lenders enrolled have made enough payments and provided enough documentation to move into a permanent modification, according to a Treasury official, who spoke on the condition of anonymity because the plan had not been publicly announced.

The administration initially gave lenders three months to complete that process, but extended it after lenders complained that it was difficult to get sufficient documentation from borrowers. It has also simplified some of the documentation required from borrowers to qualify for the program.

The conversion of trial modifications to permanent ones is a key benchmark of the success of the program, which the administration hopes will eventually help as many as 4 million borrowers. Lenders are paid for helping borrowers under the program, but do not receive their payments until the modifications have been made permanent.

The administration will also be announcing partnerships with state and local entities to help borrowers move into permanent modifications and more resources for borrowers looking for help, the Treasury official said.

“It’s true that we are taking additional steps to enhance servicer transparency and accountability as part of a broader focus on maximizing conversion rates to permanent modifications,” the official said. “Additional details about this effort — which will also include partnerships with a broad array of organizations and new resources for borrowers — will be announced on Monday.

The administration has also been under pressure to prove its program does enough to help unemployed borrowers, a growing part of the foreclosure problem. Borrowers with little or no income have fewer options to save their home, housing advocates say. And government officials are set to announce rules as soon as this week on an expansion of the program, giving lenders incentive money to allow borrowers to sell their homes for less than their outstanding balance, which is known as a short sale.

Article Source: http://www.washingtonpost.com/wp-dyn/content/article/2009/11/28/AR2009112802436.html

Obama Loan Modification Plan

A loan modification occurs when the owner of a mortgage agrees to alter one or more of the following elements of the loan: the interest rate, term, and/or principal balance.

It is important to understand who is the true “owner” of the mortgage. The institution you make your mortgage payment to is typically a servicing company. They collect payments on behalf of an investor, who has the ultimate say in whether a loan will be eligible for modification assistance. The process of how mortgages are bundled and sold is very complex, but the important thing to remember is to approach your servicing company with an open mind and patience. It also helps to research and understand the programs that are available.

In March, the Department of Treasury announced the Making Homes Affordable initiative. There are two components — the Home Affordable Refinance Program (HARP) and the Home Affordable Modification Program (HAMP). HARP provides an option for homeowners who have stayed current on their mortgage to refinance and take advantage of today’s low interest rates even though values have dropped below normally accepted levels. The current guidelines allow for refinances up to 125 percent of appraised value. The investor or owner of your mortgage must be either Fannie Mae or Freddie Mac in order to qualify for this program.

The more widely used program is HAMP. Any servicing company or investor is eligible to participate in this program, and there are financial incentives for each loan that is successfully modified. The goal of the program is to bring the total housing payment down to 31 percent of the gross household income. Total housing payment includes principal, interest, taxes, insurance and association dues, if applicable. It would also include private mortgage insurance if it is a part of your current mortgage payment. You must have verifiable income in order to qualify for assistance through this program. All eligible loans will enter into a 90-day trial period. You will be required to submit updated income documents at the time the trial modification is offered. If you comply with the terms of your trial modification and the income is appropriately verified, you should receive a permanent modification to your mortgage.

The new payment will be achieved through the use of three options in order: 1) reduction in interest rate; 2) extension of mortgage term to a maximum of 40 years from the date of modification; 3) forbearance of principal creating a balloon payment at maturity.

It is important to note that each and every file is reviewed for assistance based on income qualification and need, and everyone’s situation is different. Modification of your existing mortgage cannot be guaranteed by anyone. You should not pay for modification assistance on your primary residence loan.

If you have questions about the Making Homes Affordable program, you can find more information at www.makinghomesaffordable.gov. If you would like to consult with a HUD-approved housing counselor, you can contact the HDC of SW FL at (239) 434-2397 or visit www.collierhousing.org. All consultations are free of charge, and the counseling staff has access to the latest information, contacts and resources to assist you in preventing foreclosure.

This article contains general information only, and is not intended or to be construed as legal advice. You are encouraged to consult with a licensed Florida attorney to discuss your individual circumstances.

Article Source: http://www.naplesnews.com/news/2009/nov/04/understanding-loan-modification-and-making-homes-a/