Many homeowners are struggling to stay in their homes these days because of the current state of the economy and President Obama does realize this. It is now the norm to see foreclosed homes in every neighborhood. Homes every where are losing value quick and foreclosed homes are hurting the value of other houses in their neighborhood. Whenever a house is foreclosed, the surrounding houses can decrease in value by as much as 9% as well. Homes are declining in value so drastically, many people are paying and owe more than their house is actually worth. Because of the seriousness of the current situation, President Obama has put in place the home loan modification plan to try and help the struggling homeowners.

The plan was first announced by the government February 2009. It will begin to help those having financial difficulties as of March 2009. A part of that plan that will help is a section for those facing foreclosure. People that are facing foreclosure are given a special opportunity to refinance. This opportunity was usually only allowed after the borrower has paid a minimum of 20% of their home. Since so many people are facing foreclosure and because of all the homes losing their value, those homeowners did meet the requirements for refinancing no longer can. With the new modification plan these people can get approved to refinance their houses instead of losing it to foreclosure.

The second section of the plan, loan modification, will help 4-5 million people. This new plan will offer lenders a standard Waterfall when they approve someone to modify their loan. The lenders are more will to help with the new loan modification plan, they are making it easier to apply and making the process is simple as possible. The lenders involved would get paid for seeking out and helping at risk owners and lowering their mortgage payments much more affordable and in turn helping them side step foreclosure.

The lenders can help homeowners who are facing foreclosure by adjusting their mortgage payments to fit their current income. The first thing the lender will do is lower the borrower’s interest rate so that the result is 38% of their monthly income. The lenders are given incentives to approve and continue decreasing borrowers interest rates. They lower the rates by a per dollar matching program that they have with the Treasury Department. What the Treasury Department will do is match until the loan payment reaches 31% of the homeowners’ monthly income. Since the economy is struggling and the amount of lay offs or wage reductions many people are finding themselves spending 40-50% of their monthly income on their mortgage payment alone. This can not last very long. If this sounds familiar, applying for a loan modification can be your answer to staying in your home and not losing it to foreclosure.

Lenders use the standard Waterfall method to help borrowers. What it is, is a step by step plan that is used by the lenders to help decide the appropriate way to modify the current loan terms. Knowing exactly what the rules are will make the process of modifying the loan that much easier and less stressful. What the lenders did before the loan modification plan was add the payments that were missed on to the principle of loan. However, the issues of the insanely high monthly payments never discussed and remain high. The mortgage loan modification and refinancing plan implemented by President Obama actually tackles that very problem. People are struggling to make payments every month and this new plan helps in that very area.

-M Petrone

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