Mortgage Modification Facts

Despite all the news coverage of the mortgage modification plan under Obama's Stimulus Package

, you may still be unclear about what is available and who is qualified to apply. Here are a few facts that might help you:

1. Your lender must be approved by the government to participate. If approved, they will receive financial incentives to rework existing loans to help homeowners better afford their monthly payments and avoid foreclosure.

2. The home must be your primary residence. The loan must have been written on or before January 1, 2009, and not be for more than $729.750.

3. The goal of the loan modification is to arrive at an affordable house payment that is less than 31% of your gross monthly income. That payment includes property taxes, homeowner's insurance and any homeowner association dues you are required to pay. So, to qualify, you must have a current payment that is more than 31% of your gross monthly income.

4. If you qualify for a mortgage modification, the lender will do what is needed to get the payment in the target range. A lower payment is achieved by any or all of a few different methods:

* A lowered interest rate, possibly as low as 2%.

* A longer loan term, up to 40 years.

* Waiving your late fees.

* Possibly even forgiving part of the principal.

5. You must be able to document that you are in a hardship situation. This means that events beyond your control have made it impossible for you to make your current monthly payment. Examples could be:

* Divorce

* Military service.

* Medical bills or illness.

* Job loss

* Death of spouse or other co-payer of mortgage.

6. Most importantly, you must prove in clear facts that you can make the new adjusted payment with no financial strain, and convince your lender that that is exactly what you will do.

The stimulus plan loan adjustments will be available only for a limited window of time. You can only do one modification, and you can only apply once. So it is imperative that you compile all paperwork and fine tune your application before you begin negotiations with your lender. You must have budget figures of income and expenses and you must have documentation to verify all figures.

by: Bruce E. Nelson

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