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Seven Important Federal Loan Modification Program Facts

Every newspaper, television news outlet and website has reported on loan modifications in one form or another.  Some of this reporting has given false information, bad intelligence and an overall frustrating report of the current situation.  Between the increased focus on the loan modification industry, President Obama’s FDIC loan modification plan and the countless bank reports on loan modification status, people are overwhelmed with all the information on loan modifications.

The Obama-Biden Plan

Here are six important things any homeowner needs to know about the federal loan modification program:


1.    Monthly payments – President Obama’s loan modification plan focuses primarily on the concept that Americans will continue to pay their mortgages so long as they can afford the monthly payments.  This means that rather than focusing on the value of the home, loan modifications focus on lowering the amount of the monthly payment.  Even billionaire Warren Buffet endorsed the idea.

2.    31% - The plan calls for participating loan servicers (lenders) to reduce monthly payments to no more than 38 percent of the borrower’s gross monthly income.  Meaning, if the person’s monthly income is $10,000, then the monthly payment cannot be more than $3,800.  The government would then chip in to further bring the monthly mortgage payments down to no more than 31 percent of the borrower’s monthly income.

3.    Cash encouragement – Loan processors are being paid $1,000 for each loan modification and will get an addition $1,000 payout each year for as much as three years as long as the borrower continues making payments.  Borrowers can also get up to $1,000 knocked off of the principal of their loan each year for as many as five years if their payments are made on time.

4.    Financial hardship is important – The Obama loan modification plan is not designed for speculators who bought two and three homes during the boom, hoping to flip them.  The plan is designed for responsible homeowners who are ensnared by this current housing slump and the proceeding recession.   Only owner-occupied homes which are the primary residence with an outstanding principal balance of less than $730,000 are eligible.

5.    Net present value? – In order to determine if a mortgage is eligible for a loan modification, the loan servicer must perform a “net present value” test which compares the expected cash flow the loan would generate if it is modified with the expected cash flow it would generate if it was not modified.

6.    Second mortgages and equity loans – The federal loan modification plan addresses the issue of second liens, such as home equity loans and home equity lines of credit, by offering special incentives to eliminate them.  This part of the plan is unclear however.

Loan modification attorneys have been working with lenders, banks and borrowers for far longer than the federal government.  While this plan is ambitious, there are no guarantees, especially when such large institutions as international banks and the federal government attempt to work in unison.  A loan modification attorney might be your best option to get the best loan modification possible.  Their knowledge and experience with the real estate and banking industries, plus their ability to meet your needs one on one provide you with options that may not be available to you with the federal loan modification program.

call 800-359-6941.

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We can help you stop foreclosure with a loan modification in the following states:

If you need help understanding your option of taking advantage of the home loan modification process, the help is available to you everywhere. The process is quite tricky and it is highly recommended that you do indeed seek legal advice before signing on the dotted line, in order receive the most efficient and cost-effective modification to your mortgage payment.

Where do I get Advice
There is advice all over the web on how to receive a loan modification; some of this advice is quite helpful, while some is quite dreadful. There is also the opportunity to hire a professional service that will help you go through the paperwork and work with the lender to help you get all the benefits that you deserve, due to a hardship. Loan modification is a process that must be understood completely and thoroughly. This article can actually offer you an insight on the process of loan modification and tips that will better help you as a homeowner save your home from the risk of a foreclosure.

Loan Modification Advice
First and foremost, it is important to determine if you are eligible for a loan modification. This requires writing a letter of hardship explaining to the lender what exactly the reason is for your late payments and the fact that you are unable to pay your mortgage. Doing a loan modification on your own requires more than just advice. Becoming educated about the process is more important. This is perhaps a good reason to hire a professional loan modification company to take part in the process. They will handle everything for you, while educating you in the progression. There is a fee charged for hiring these companies, but in turn your mortgage payment can be lowered quite a bit and professionals can even find things in your original loan papers that may prove that the lender may have broken the law during your original mortgage signing.

If you do choose to take the big leap of the loan modification process on your own, you must first contact the lender and they will lead you to the correct department, normally the loss mitigation department. You may not want to directly say that you are in the process foreclosure. We do not want the lender to think your situation is not worth their time before hearing you out. Always document anything relating to the loan modification process, every phone call and any other information you may receive during the process must be documented. Always discuss every option available with your lender, so that you may come up with the best alternative for you. It is true you will save money going directly through your lender and let’s face it, you are struggling already trying to make your payments, but professional assistance can help immensely.

No matter what direction you decide to take, loan modification will be what determines the amount of time you have in your home. If you are eligible you should act as soon as possible.



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