William Chesney asked:




With a view to lend a helping hand to those people having problems with mortgage repayments, Obama’s government has come up with special home refinance and loan modification programs. These programs mainly aim at helping the destitute. Due to recession and other economical crunches, many home loan borrowers are unable to repay their mortgage loans promptly. In such a scenario, this special package offered by the government provides relief to about 9 million struggling mortgages.

This package includes two main key components:

Home Refinancing Loan modification

Let us look at each of these components in detail:

Home Refinancing: allows two major players Fannie Mae and Freddie Mac to refinance all those borrowers whose balance outstanding is more than the true value of the property. However, borrowers need to fulfil a clause to be eligible for this program. The mortgage loan procured by them should be guaranteed by these agencies. On the other hand if you have the financial ability to pay the excess amount due, you would be entitled for this option.

But this program is only applicable to those properties that are being used for residential purpose. Any unoccupied property would not get qualified under this program.

Loan Modification: In order to encourage and promote this program on a large scale, Obama government has announced special incentives to lenders modifying loans. The main aim of this program is to help homeowners avoid foreclosures.

How does home loan modification work? Loan modification cuts down the rate of interest up to 2% on the existing loan, increase the repayment period which would in turn reduce the monthly EMI to be paid towards this loan. And most importantly all the penal charges and late fee are waived off.

Mortgage modification also allows lenders to have control over the total payments made by the borrower. In no case, the lender would be able to increase the liabilities of borrower more than 31%.

Yolanda