| The statistics are staggering: $2 trillion dollars lost in | | | | interest rate, longer term or principal forgiveness. |
| home equity last year means that millions of | | | | Borrowers who have lost a considerable amount of |
| homeowners now owe more than their home is | | | | equity may be offered a loan workout that features |
| worth. A loan modification program that offers a | | | | a lower principal balance. Lenders are expected to |
| principal reduction so that the mortgage balance more | | | | begin offering this option to borrowers more |
| accurately reflects the homes true market value is | | | | frequently to help stem the tide of foreclosures and |
| one way to entice borrowers to keep making loan | | | | keep borrowers in their homes. |
| payments and avoid foreclosure. Which lenders offer | | | | In addition, a borrower who is not currently |
| this type of program and who will qualify for a | | | | delinquent may apply for this loan modification |
| reduction in their home loan balance? Here is some | | | | program by demonstrating an inability to make |
| helpful information for interested homeowners. | | | | payments due to a trigger event, such as an interest |
| The Federal government's policy for loan modification | | | | rate reset or loss of job or income. Homeowners will |
| is that if a servicer determines that the lender would | | | | have to prepare and submit a loan modification |
| suffer a greater loss from foreclosure than it would | | | | application that provides evidence of financial hardship |
| from modifying the loan, then a loan workout is | | | | and the inability to meet the current loan payments. |
| advised. The Treasury Department has allocated $75 | | | | Financial statements must also show that the |
| billion, part of which lenders can use to offset losses | | | | borrower will be able to pay and maintain the new |
| from principal reductions offered to qualified | | | | lower modified mortgage payment. It is very |
| homeowners. | | | | important to prepare your financial statement |
| Who qualifies for this loan modification program | | | | correctly and make the necessary adjustments to |
| featuring principal reduction? To be eligible, a | | | | your budget before your lender review it for |
| homeowner must: | | | | approval. If you are confused about your debt ratio, |
| | | | target payment, disposable income or the other |
| 1. Live in the home as their principal residence | | | | qualifications, then you can use the Loan Mod Quick |
| 2. Be facing a financial hardship situation | | | | App software that will do all the calculations for you. |
| 3. Be able to prove their income and meet certain | | | | You can save hours of time and make sure your |
| approval guidelines | | | | figures are accurate the first time. |
| The federally subsidized plan, called Making Home | | | | Although not all homeowners will qualify for this loan |
| Affordable or HAMP, requires participating lenders to | | | | modification program featuring principal reduction, for |
| conduct an analysis called a Net Price Value for each | | | | those who do meet the requirements an affordable, |
| modification application. This process determines if | | | | lower monthly payment based on a lower loan |
| the lender will save more money by foreclosing or | | | | balance will provide the relief needed to stay in their |
| offering a loan workout that features a lower | | | | homes and avoid foreclosure. |