Obama Home Affordability Refinance and Loan Modification Plan: Reap the Maximum Benefits
With Obama’s Home affordability plan in execution since March, 2009, hopes of many disheartened homeowners have been restored. However, there are many apprehensions regarding the efficacy of the plan. “How will the plan second mortgage loan?” – is the most prevalent question. Let’s understand the procedure in detail.
There are two parts of the Obama Home affordability plan.One is refinancing, and the other is loan modification. With the sharp fall in property rates, many homeowners could not avail a refinance because their loan-to-value (LTV) ratios are too high for them to meet the criteria for a refinance. However, under the Obama Home affordability refinance plan, homeowners with an upside-down loan can also avail for bad credit home mortgage refinance. People with a variable interest rate home loan can shift to fixed rate loan with lower interest rates than the current loan’s. Such a low-cost mortgage refinance loan will save those thousands of dollars annually.
Homeowners who do not meet the eligibility criteria for refinancing can apply for mortgage loan modification. People have lost jobs or have encountered cutbacks in paychecks due to the economic slump. So, the monthly mortgage payments take up a chunk of their income. The mortgage loan modification program assures that the monthly payments do not surpass 31 percent of an individual’s monthly income. Borrowers can avail for interest rates as low as two percent, and repayment duration as long as 40 years. Hence, low monthly payments are guaranteed. The principal amount in not reduced under the plan though. Lenders are not forced to participate in the program. However, the program is, in most cases, more profitable than foreclosure. Hence, they choose to modify the mortgage. There will be a three-month trial period with the new loan terms. If the homeowner is still current at the end of the ninety days, the modified terms stay in effect for the next five years. An interesting incentive for borrowers is that they can receive up to $1,000 for five years as long as they stay current on their payments. However, the money is used to pay down the balance on their loan. It is not handed over to the homeowners lest they spend it away.
Government loan modification is a good bailout for people on the verge of foreclosure. People can save their homes and get back their financial life on track.
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