Their have always been home loan modification programs available to homeowners to prevent an impending foreclosure. However, recently President Obama has enacted his “Making Home Affordable” plan which allows homeowners a chance to modify their home loan into a new one with a fixed 4.5% interest rate. Here is some details:

-Once the process of foreclosing a home has been started, only the courts, not mortgage lenders or banks, would have the authority to lawfully evict a homeowner.

-The only ground for home eviction would be if the homeowner has defaulted on the mortgage.

-The mortgage lender or banks would not be allowed to profit from the forced sale of your home. This means that it is in the banks best interest to work something out with you and get your payments to an affordable level.

So what type of benefits should I expect to see from taking advantage of the “Making Home Affordable” home loan modification plan?

-Homeowners who take advantage of this plan and modify their home loan will be able to get a new monthly mortgage payment that will not exceed 31% of their monthly income. In order to reach this number, the interest rate may be reduced, the length of the loan extended, or a combination of both.

-As long as the homeowner keeps up with and pays in full and on time their new mortgage payments, for a period of 5 years the Government will reduce your mortgage amount by $1000 per year as an added bonus for a total additional savings of $5,000

How much will this “Making Home Affordable” program going to cost?

Homeowners using this program will have their choice of mortgage lenders, lawyers, and home loan modification experts, but it is not free. Fees vary from anywhere between $1500 - $4500 but monthly savings have been reported to be in the $600 per month range. This means that even at $4500 you would stat to benefit from this plan within 9 months and then the money would start rolling in. However, $4500 is a lot of money and each situation needs to be evaluated according to the homeowners financial situation.

-M Petrone

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