Loan Modification Programs That Aid You During Financial Crisis and Foreclosure

Due to recession, high interest rates, rising unemployment and other such adversities, many people are unable to further pay their monthly mortgage loan payments and thus are on the verge of financial instability or foreclosure of their homes. To avoid these, the new government under the Obama regime has commenced several financial plans which include the Home Affordable Modification Program (HAMP) which allows reduced and affordable payments to homeowners who meet the requirements of the plan.

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Due to the lesser availability of jobs and lower incomes, mortgage payments are often the ones that suffer in most households comparing to medical, food and other essential expenses. As they have no funds to make the payments, many people ignore the lender's phone calls and mail notices and that can lead to foreclosures and homes being taken away. You will be listed as a defaulter in the books of all the bank and lenders, denying you any further loans from the country EVER again! Loan modification programs give you a chance to gain back your financial status and pay your mortgage loans more easily.

HAMP provides incentives and cash-grants to loan-giving financial institutions and individuals from an allocated $75 billion which offer these modifications to the deserving ones by extending the loan periods, indirectly leading to lower payments being made by them. Additional subsidies are also given to lenders who provide the loan revisions to those who have a risk of being defaulted or having their property foreclosed. Interest rates can also be reset by the lending companies. Many of the people that are on loan modifications have the availability to make their payments on interest rates as low as 2%. Lenders, especially banks, also have the option of altering the principal amount that has to be paid and make the sum due more comfortable and affordable for the client.

The advantages of these loan modifications kept aside, not everyone is qualified to be agreed on giving them. Various factors have to be regarded before somebody becomes eligible for the amendment. Firstly strong documented evidence would have to be provided showing the existing ability of the borrower and whether the family unit has sufficient income left after necessary expenses cut, to pay for the mortgage or loan payment. The property mortgaged must be the primary property of the borrower and it is checked whether any previous modifications on the loan have been taken or not. Hardship forms are filled by the borrowers explaining any hardships or troubles that they face, which are a major factor for them being unable to make the payment. The amount due for the mortgage must pass specific criteria depending on the number of people that live in the home. The net mortgage expense, including any late charges and interest rates, should be more than 31% of the gross income of the family.

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