Obama’s Plan for Mortgage Modifications – New Rules Nationwide.

Via on Apr 13, 2009

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Finally, some good news for homeowners who are struggling to make their mortgage payments. A new plan from the Obama administration sets national guidelines for loan modifications. These modifications are intended for homeowners who can’t afford their current monthly mortgage payments due to a hardship. It does not help those who can afford their mortgages or those who own investment properties.

Here are the basics. If you can show a hardship such as lost income, increased expenses, inability to afford an adjustable rate mortgage, or other indications of being at risk for default, your payment could be reduced to 31% of your pretax income. For example, if you earn $60,000 before taxes, the annual total of your principal and interest payments would be $18,600 or $1550/month. This guideline is intended for first mortgages. If you have a second mortgage, that would be in addition to the reduced payment on your first. The Obama plan will address 2nd mortgages or home equity loans in the near future, but those details are not available yet.

To qualify, the mortgage must:

  • be on your primary residence and
  • have a balance of less than $729,750 and
  • be obtained prior to January 1, 2009

 The new, reduced interest rate could be as low as 2% and would be in effect for 5 years. After that, your rate would increase by 1% per year until you get back up to the going rate as of the week you modified your loan. This week, that would be about 5%.

You can be current on your payments or even be in foreclosure and still qualify for the modification. Homeowners will have to prove they reside in the home as their primary residence, most likey by their credit report. They must also provide financial documentation to prove their hardship. To see if you qualify, contact your mortgage lender. Lenders are expected to be inundated with calls by homeowners, so be prepared for busy signals and/or long wait times.

Government officials warn homeowners to be wary of offers to pay for a service that will get your loan modified for you. You can definitely do this yourself with some patience and organization.

For more info:

 Go to the government site Making Home Affordable

U.S. News and World Report’s 7 Things You Need to Know article

blog by elephant’s Realtor – Liz Bensonfull-size-headshot-21

About Liz Benson

Liz Benson is a Realtor/EcoBroker with Colorado Landmark Realtors based in Boulder, CO. She is also Mom to a lovely teenage daughter and an energetic border collie. When not juggling those duties, she enjoys travel, riding her vintage cruiser and DIY home improvements.

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8 Responses to “Obama’s Plan for Mortgage Modifications – New Rules Nationwide.”

  1. [...] Obama’s Plan for Mortgage Modifications – New Rules Nationwide. [...]

  2. kateb says:

    The banks are not modifying. We still need the stick to boost them along ( google online petition S61 and sign).
    Call senator Bayh's office and tell him to stop holding up the only thing that will help this country return to
    normal……..

  3. BETTY says:

    I HAVE BEEN TRYING TO MODIFY SINCE JUNE OF 08 . I RECEIVED A FORBERANCE AGREEMENT IN WHICH I MADE THE THREE MONTHLY PAYMENTS FOR APRIL MAY AND JUNE . NOW THE BANK TELLS ME THAT OBAMA CHANGED THE GUIDELINES AND THAT I HAVE TO RE-SUBMIT A NEW HARDSHIP LETTER TAX FORMS AND BANK STATEMENTS. AND PLUS I JUST RECEIVED A NEW FORBEARANCE AGREEMENT FOR JULY AUGUST AND SEPTEMBER. ARE THEY JUST PULLING MY LEG . I DON'T THINK THIS SHOULD HAVE TAKEN THIS LONG TO BEGING WITH. IF ANYONE HAS ANY ADVICE THAT CAN HELP ME I WOULD APPRECIATE IT.

  4. sheffer says:

    my son said hire a Lawyer its worth the cost… He got his already…

  5. Royce Stotts says:

    Last year investigated investing in foreclosures but wasn’t succesful. Would like to get your thoughts on buying them.

  6. Dorinda Erle says:

    I understand that but where does it take us?

    It’s always darkest before dawn. So if you’re going to steal the neighbor’s newspaper, that’s the time to do it. :)

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