Government Mortgage Plan - The Details.
Here's the details of the mortgage-assistance plan launched by the Obama administration.
The program's plan is to help qualified homeowners whose current mortgage is unaffordable and puts them at risk of default and foreclosure. Let's walk through how each works.
The Loan Modification Program
Aimed at: homeowners who are more than 5% underwater, or are already in default on their mortgages or at risk of default. I want to stress that last point: No longer do you have to be in default to qualify for a modification; the program is in fact designed to help millions of homeowners before they miss payments or are in default. This is such a welcome change in policy; prior to this announcement lenders typically wouldn't talk modification with you unless you were already behind in payments. Now they will reach out and work with qualified borrowers before they get behind. Proactive, not reactive. That's what I like to see.
The Nitty Gritty: The loan modification program does not have any limit for how underwater you may be. I want to repeat that, for it is a change from the initial announcement. There is no cutoff based on how underwater you are.
Now that doesn't mean everyone who is deeply underwater, or way behind on payments, will automatically qualify for help. You still need to be able to afford the payments.
Here are the basic qualifying rules for the loan modification program:
- Your loan must be less than $729,500.
- You must be ready and willing to fully document your income (your most recent tax return and at least two current pay stubs are required.)
- You must sign an affidavit (the lender will provide) that states you have a financial hardship.
- If your total household debt-including other loans, credit card balances and alimony payments-total more than 55% of your income you must agree to sign up for financial counseling.
Then it's up to the lender to figure out if you are a good candidate for a loan modification. The basic idea with this program is that lenders will agree (with incentives from the Administration) to reduce the interest rate on qualified loans to as low as 2% in an effort to reduce your payments so you can afford to stay in your home. The way it will work is that lenders will size up your monthly debt-to-income ratio (DTI). The lender has to agree to reduce your interest rate to a point where your DTI is no more than 38%. Then the government jumps into the picture and will agree to pay half of the cost of having the lender reduce the payment even further to get you down to a more manageable 31% DTI.
If the rate reduction doesn't get you down to the target 31% DTI, the lender can consider extending your loan term to 40 years to lower the monthly cost you pay, and can also consider "principal forbearance" where it stops charging interest on a portion of your loan amount for a set period.
To learn more about how each program works, please read this official release from the Treasury Dept.
WHAT YOU NEED TO DO...
- Start pulling together your loan documentation.
- Fill in our Case Evaluation to have Mr. Miller give you a FREE CONSULTATION.
- Attend one of our FREE Seminars to get educated on all the details and changes.
- Apply for the Modification to lower your payments.
Contact the Law Offices of Jake Miller, LLC
To discuss your concerns with an experienced lawyer, contact the firm or call 305-758-2020 for an appointment. Evening and weekend consultations are available upon request. Attorney Miller's offices are located near the Bal Harbour Mall, east of I-95.
