Obama Loan Modification Homeowner Stability Plan

November 6th, 2009 by Anthony M. Flores

The U.S recession has really hurt the economy and has severely increased the jobless rate here in the country.

Perhaps one of the first signs of an ailing economy is the housing market. With a considerable amount consumer debt, folks are increasingly falling behind on their mortgage payments. To assist homeowners in reducing their housing payments, President Obama’s has come out with the Loan Modification Homeowner Stability Plan.

The focus of loan modification is to lower the homeowners mortgage payment. With this in mind, President Obama’s government has designed a loan modification plan, which allows homeowners the opportunity to reduce excessive charges that are being imposed on debt paying customers.

How it works?

1. Interest rates and cap:

The loans that will undergo modification will be allotted a significantly reduced interest rate. The modified interest rates can fall between 2-6% depending on the customers hardship and ability to prove financial difficulty due to their mortgage.

3. Reduction of principal balance:

The Obama plan implies that the principal reduction amount will not inflate the interest charges. If the option of principal reduction is used, the remaining capitalized balance will be carried forward until the loan that is modified matures and the concerned property is sold or the loan is refinanced.

3. Reduction in the monthly payments will be shared:

Your lender will help to assist in reducing the monthly payments.

The loan modification plan states that the lender cannot lower the mortgage payments to less than 38% of the Debt to income (DTI) ratio. The administration will further try to revive the interest rates to 31% of the DTI ratio.

4. Lenders incentive to modify:

The homeowner stability plan provides lenders with a $1000 incentive to reduce their mortgage payments and qualify them for loan modification.

In addition, the homeowner will receive $1000 of principal reduction for the next 5 years as long as they make their payments on time.

5. Payments for successful performance of debtors:

The decrease in principal is an added benefit to this loan modification plan. This principal reduction can result in a reduced principal balance of 2-15% of the current home market value.

It is necessary for a borrower to keep all the papers in place to prove that the loan modification plan was signed. This will help the homeowners to keep a track of all the current happenings in the loan modification program.

Obama’s plan for loan modification has been welcomed by homeowners who are facing difficulties to repay their loans and is proving to be a hit amongst homeowners, who are on the verge of home foreclosures.

Anthony Flores is a recognized authority in http://www.modificationnetbranch.com and loan modification processing questions.Visit our site to see if you qualify for loan modification today!