Its been about 2 weeks now and most homeowners are even more confused about President Obama’s new modification plan and the direction they need
to take with their modification. 

In an attempt to understand and find clarity in all of this fog we
have summarized the highlights as follows: There has
been 275 Billion dollars set aside to assist
homeowners who need financial assistance in
this current meltdown. The hope is to assist
approximately 9-million households.

Qualifications are as follows:

1.) The Home must be owner occupied, primary
residence. This must be documented by credit
report.
2.) There must be a documented hardship.
3.) The existing loan cannot exceed $729,750.
4.) The Bank will be offered incentives for several
factors: after the loan has remained current
for three months, the lender will receive
$1,000. Additionally, the lender will receive
$1,000 for each year that the borrower remains
current for up to three years.
5.) The Homeowner can receive a $1,000 cash amount
to be used toward the reduction in Principle
amount for up to five years if he remains
current on his mortgage.
6.) The target amount for the lender to aim for
in reducing the payment amount is 31% of
Gross income for Housing. (PITI). This is
to be accomplished by first, reducing the
interest rate to as low as 2%. If this does
not accomplish the desired ratio, the lien holder
is to extend the term up to 40 years. If the
objective is still not achieved, the lienholder
is to Forbear enough principle amount at 0%
interest to accomplish the desired threshold.
7.) The Bankruptcy judges have been given the
ability to order the lienholders to reduce
the principle balance to make the budget of
the individual conform.

The Government will subsidize these shortfalls
to the lenders making it “profitable” for the
servicing lenders to complete these modifications.
There is a formulation for the lenders to use called
“Net Present Value” which will help the lender
determine the most cost effective way to deal with
a property in default. it is expected that the Loan Modification will be the answer for the most part.

If you don’t fir within these guidelines, don’t panic. There are still plenty of options available whether you fit within these guidelines or not. First, don’t automatically think lenders will just reduce your payment because of your current income so you can get to the 31% number. It doesn’t actually work that way though. You must understand that lenders don’t actually have to follow this plan because they have until December 31, 2009 to get on board. In addition, lenders are less likely to give a homeowner the best option available because they know homeowners have no experience in modifications and homeowners are just desperate to save their home.

As I always say, do your research no matter what route you decide to take because you don’t want anyone to take advantage of you.