When people refer to the federal loan modification program, they are most likely referring to President Barack Obama’s Making Home Affordable Program. The purpose of the plan is to either refinance the mortgage or modify the loan terms as a way to assist homeowners in their monthly payments and/or prevent foreclosures.

It has been estimated that approximately five million homeowners will benefit from this program. But lately more and more reports and complaints here on LoanSafe.org tell another tale. Because the plan is voluntary for mortgage servicers, it is proving to provide little relief for homeowners who are trying to get help under the program.

The Making Home Affordable plan is focused on the belief that the homeowners will remain in their homes because it is not the declining prices of their homes that is the problem but the difficulty in coming up with the monthly payments. Based on this philosophy, the federal government has asked loan servicers to decrease the monthly payments to a value that will not exceed 38 percent of their gross monthly income. The government will assist further by shouldering seven percent so that the homeowner will only need to pay an amount that is not more 31 percent of his gross income. 

To be able to meet these values, the loan servicer is supposed to start by dropping the interest rate to a value that could be as low as two percent. If this would prove to be insufficient, the servicer will lengthen the loan payment period by as long as 40 years. The loan servicer may also forebear the loan principal without charging any interest.

To motivate loan servicers, they will be given $1,000 by the government for every loan modification that they approve. This will not stop there because they will continue to receive $1,000 every year, up to a maximum of three years, if the borrower is able to continue with the payments. 

However, only primary residences that are occupied by the owner and which have principal balances not exceeding $729,750 will be able to benefit from this loan modification program. Also, homeowners will have to present some documents to prove that they are suffering from serious financial hardships that have resulted in their failure to make the payments.

Please join our community at www.LoanSafe.org/forumand tell us your story or come get help from the other 17,000 homeowner members who are fighting to save their homes just like you.

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