Many people are finding it difficult to explain why or how they came to be in a position of struggling to meet their mortgage payments, problem is if you are applying for a loan modification then this part of the requirement and you have to provide a reasonable and honest explanation for why you are struggling.

You will find a template for putting together a hardship letter in one of the previous posts on this site called Hardship letter template for a loan modification request.

For further information I have included a link at the top of the page to an article that explains what information you need to add to a hardship letter when explaining how you came to be in financial difficulty. The article is very well written and tells you exactly which questions you need to answer with respect to explaining your difficulties from a lenders perspective, which is of course the perspective you need to understand and satisfy.

This article is primarily concerned with the short sale process, but the questions asked will also satisfy the needs for a loan modification request, they are in effect the same reasons but for an alternative process.

So if you are struggling to explain and need a helping hand then please refer to this additional source of information.

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The first thing your loan servicer will do to see if you are eligible for the loan modification program is establish if the loan you have meets the terms for loan modification and if it does:

They will ask about your current income, what assets you have, if any, and any ongoing expenses. What they want to know is whether you will be able to make any new payments that will be due after loan modification by understanding your specific circumstances. Anything you tell them will eventually need to be supported by documented evidence i.e. tax returns, pay stubs etc.

They will also need to establish that your monthly first lien mortgage repayment does not exceed 31% of your gross monthly income.

If you get this far they will add past charges (any tax, interest, insurance and costs that your lender paid to 3rd parties on your behalf to the loan balance, effectively consolidating your debts into the mortgage balance. Note this does not include late fees, charges you have received as a result of being late on payments, these must be written off.

They will then calculate the interest rate required to bring your payments to a maximum of 31% of your gross monthly income.

Then there will be a value test to establish if the cost of the loan modification is less costly for the investor than the other option of not modifying the loan. The government’s incentive payment is also taken into account when applying the value test and people who have a lot of equity or whose incomes are very low compared to their home value are unlikely to pass this test.

Assuming you make it this far the next hurdle is to make the first 3 months of payments at the new repayment level. If you do this the loan modification is then made a permanent arrangement that will keep your repayments at a fixed rate for 5 years after which it will be capped at a  low rate for the life of the loan remaining.

You will of course have to sign the modification agreement and associated documentation attesting all information is true and accurate. Any false declarations will be a violation of Federal Law which is a serious offense so make sure you are upfront and truthful otherwise be prepared to suffer the consequences.

If you are serious about avoiding foreclosure the worst thing you can do is ignore the letters and the problem. The more payments you miss the more difficult it will become to resolve the problem and loosing your house will become more likely.

So make sure you contact your home lone mortgage lender as soon as you become aware that you have a problem. There will be options available to you to help you through your financial difficulties and mortgage lenders really do not want your house, they would prefer that any financial problems are resolved. Some of the options are home loan mortgage refinancing and loan modification but there may also be alternative options.

Open and read all correspondence from your lender, apart from anything else the information provided may include suggestions for avoiding foreclosure. You are also likely to have any proposed legal actions against you outlined and you need to be aware of these, not opening your mail cannot be used in your defense or as an excuse if you end up in court.

Take the time to read and understand your loan documents so you know what your lenders procedures are if you do not meet your repayments. Also be aware that foreclosure laws and time frames are different in each state so find out what the rules are in your state, you can inquire at the State Government Housing Office.

If you need further help and advice you can contact a HUD approved housing counselor, this service is usually free and you can Find a Counselor near you using this link.

Obama’s Stimulus Package has 2 main components:

1. Refinance

2. Loan Modification

Let us discuss each one of these components in detail:

1. Home Refinance Stimulus Package

· In this program the two most powerful mortgage lending agencies of the government Fannie Mae and Freddie Mac would refinance the home loans of all the owners who owe much more amount to the bank than the actual value of the house. The only condition for this package is that the mortgage must be a guaranteed one by Fannie Mae and Freddie Mac, and then even if you are strong enough to pay the entire extra amount, you can gain advantage of the program.

· But there is one major condition joined with refinance stimulus package and that is; the offer is only valid for the properties which are used for residential purpose. Any property which is lying like a building and no one is living inside, will not qualify for Obama’s home refinance stimulus package.

2. Loan Modification Stimulus Package

· There have been special incentives that Obama’s government is going to provide to all the lenders for doing loan modification on the existing home loans of the borrowers. According to this program, the homeowners can get rid of foreclosure by getting it done. The main features of this program would be; interest rate would be reduced and it can go down to 2% only, tenure of the loan would be increased to reduce monthly payment amount and borrowers will get waiver of late fees.

· With loan modification, lender will also take care of the total monthly payments that a borrower is making and it would not increase than 31% of the total monthly gross income.

To know more about Home Refinance Stimulus Package and to check if you qualify

Click Here –> Loan Modification Help

President Obama has offered $1000 incentive for home owners that opt for Loan Modification instead of Short Sale Or Foreclosure.

To know more about Latest Loan Modification Programs and to check if you qualify for Government Grants

Click Here –> Federal Grant For Homeowners

FREE Trials are for a limited time only, so get yours today.

Article Source: http://EzineArticles.com/?expert=Luke_Cambell
http://EzineArticles.com/?Home-Refinance-Stimulus-Package—Obamas-Stimulus-For-Mortgage-Refinancing-and-Loan-Modification&id=2213316

One thing you should know for sure is that there are differences between the mortgage refinancing program from Obama’s initiative “Making Home Affordable’  and an earlier initiative that came from George Bush  the ‘Hope for Homeowners’ program.

Hope for Homeowners Program

This program is administered by the Federal Housing Administration and its key features are as follows:

• Mortgage is fixed rate and can be taken over a period of 40 years (recently extended from 30 years)
• Refinancing provides the possibility of reducing monthly repayments
• The agreement is entered into voluntarily by both lender and borrower

To be eligible for this loan certain criteria needs to be met:

• The house must be your primary place of residence and you should have no interest in other residential properties
• Your mortgage must have been in place before January 1st,2008 and you must have made at least 6 monthly payments
• You must be is a situation where you cannot make your current mortgage payments without assistance
• You cannot have been convicted of a fraudulent offense in the last 10 years, obtained a mortgage off the back of false claims or deliberately failed to make a payment on a debt
• You must maintain a full record and documented evidence of income and employment
• You have to be prepared to share the positive equity in your home, both current value and any future increases
• Your total mortgage payments, including capital repayments, interest and insurance will have been more than 31 % of your gross income from March 2008.

Constraints and payments:

• the loan to value ratio of your house can be no more than 96.5% (recently increased from 90%) on the understanding that your total mortage payments can be no more than 31% of your gross income and your total debt repayments can be no more than 43% of gross salary for equivalent time periods (e.g. monthly). This can be increased to 38% and 50% repsectively if the loan to value ratio is 90% or less.
• the interest rate will be based on current market rates and agreed between you and the lender
• there will be an initial mortgage insurance payment of 3% after which you will pay a 1.5% mortgage insurance premium as part of your monthly payments.
• You will also be required to pay closing costs on the loan, for an idea of what these costs will be you will be provided with a best estimate at the time of taking out the new loan.
• if you have a second mortgage and want to take out another mortgage under this program you will have to wait 5 years from the start of the first loan.
• This program ends on September 30th, 2011

These are the key features of this program, to find out further details and information you can talk to a FHA approved lender or a housing counselor.

Making Home Affordable

This program was introduced by Obama to try and get the American housing market back on line and the key features are as follows:

• there are 2 aspect to this initiative, mortgage refinancing and loan modification, it is the mortgage refinancing aspect that is comparable to the ‘HOPE for homeowners’ program which is why this is the aspect we will be looking at here. Refer to my previous post for ‘loan modification.
• Anyone who has an existing mortgage that is owned or guaranteed by Freddie Mac or Fannie Mae can be considered for mortgage refinancing  providing they meet the additional qualifying criteria.

Qualifying criteria for the ‘Making Home Affordable’ mortgage refinancing option:

• you have to be the owner of a 1 to 4 unit home
• your mortgage payments must be up to date (no more than 30 days late on a payment in the previous 12 months)
• your loan amount cannot exceed more than 125% of your house valuation (recently increased from 105%)
• you must be in a position where you can afford to make the repayments on the new loan albeit they should be lower than your current loan (this refers to a change in circumstance since you took out your current loan e.g. you may have lost your job and consequently income)
• refinancing improves the affordability or long term stability of your loan

Constraints and payments:

• Points and fees will be advised by the lender in accordance with their terms
• Interest will be set at market rates around the time of the loan.
• Anyone who is considered to be delinquent or has exceeded a  30 day late payment period more than once in the last 12 months will not be eligible
• Mortgage insurance is required only if your current loan includes private insurance
• The monthly payments by default will include an allowance to cover taxes and insurance.
• This program ends in June 2010

You are entitled to free advice from your lender or a HUD approved housing counselor for the ‘Making Home Affordable’ program never pay anyone for this service.

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The first general rule is that you should be struggling to make your mortgage payments if you are meeting your mortgage payments comfortably then you are not going to qualify. So what exactly do the stimulus package rules say for loan modifications: -

• You have to be in residence of a single family home
• Your total repayments including capital repayments, interest, tax and insurance must be more than 31% of your gross income (from March 2008)
• Your mortgage balance must not exceed $729,750 for a single unit but for multiple units the amount can be up to $1,403,400 for the maximum 4 units
• Your mortgage pre-dates the 1st of January 2009

What you should also know: -

The scheme ends on the 31st of December 2012

Not all the mortgage lenders are participating in the scheme, despite there being incentives in place to encourage them to do so.  Also if you are trying to secure the deal on a home that you have bought as an investment and it is not your primary residence then you will not qualify.

Some loan agreements and financing preclude you from taking part in the scheme and ultimately it is the loan provider that decide whether your particular circumstances are suitable for the scheme or if offering you the loan modification is not in their best interests or the  best interests of their investors. Which means in a nutshell that getting on the scheme is not a given even if you meet all the other qualifying criteria.

Advantages over the mortgage refinancing option:

• it is unlikely that you will be required to go through a new credit check
• processing the application should be much quicker than the mortgage refinancing option.

This is the 2nd of 2 prongs of  Obama’s initiative on giving aid to people facing financial hardship over home ownership, the option will not suit everyone and any changes to you current arrangement should be carefully considered and the proper advice regarding your specific circumstances should be taken into account.

For the mortgage refinancing details please refer to my previous post.

The Obama new stimulus package amounts to a massive $1 trillion bale out package that offers new loan options, grants and tax credits. So for home owners that are struggling, there is relief in site and it is possible to take a home loan mortgage refinance option to get lower rates of interest or longer repayment periods.

Obama has offered a $1000 incentive to encourage home owners to opt for mortgage refinance or loan modification instead of going for a short sale or foreclosure option.

There are rules that apply to these mortgage refinance deals : -

Loans guaranteed or issued by the Federal National Mortgage Association, (Fannie Mae) or the Federal Home Mortgage Corporation, (Freddie Mac), which are institutions that have been in existence since 1968 as government sponsored enterprises (GSEs), are all eligible for mortgage refinancing providing that :

• You are the owner of a 1 to 4 unit home
• The existing mortgage value is no greater than 105% of the valuation of your home. This has now increased to 125% since it became clear that it was locking many people out of eligibility for the program, see home loan mortgage refinance update.
• You are up to date with your payments and have not fallen behind.
• Your circumstances have not changed and you are able to afford the new lower repayments, e.g. you haven’t lost your job and consequently your income.

Additional information

The mortgage refinancing option is only available until June 2010
The applicant can ask for a fixed rate of interest rather than a variable rate (adjustable rate mortgage)
Longer term loans are being made available so that you can pay back over longer periods e.g. 30 years.
If your mortgage isn’t guaranteed or issued by the 2 primary institutions (Fannie Mae or Freddie Mac) then you are not eligible

Also on a cautionary note home loan mortgage refinancing may require some fees to be paid, you may also have to go through new credit checks and they typically take longer than the loan modification option. The best way forward for finding out if this it the choice for you is to approach your existing lender and see if you qualify and what the full conditions are so that you can make an informed decision.

For the United States this is one prong of a two pronged approach to to balancing out the financial chaos that has existed for homeowners since the near collapse of the banking system both in the USA and worldwide. I will be discussing  the 2nd ‘loan modification’ prong in a separate post.