Because of the economic recession and the persistence of a turbulent economic environment, many people find themselves in such a severe financial crunch that they are unable to be current in their payments of mortgages levied upon their loan.
Many are in such a dire situation that they have to bear with a heavy heart the foreclosure of their properties in order to settle their mortgages.
As the cost of undertaking the foreclosure of properties is even higher than the payment of mortgages, several banks are eager to provide assistance for the mortgage payments rather than initiate an expensive foreclosure.
For this reason, the government has set aside a huge amount of money to provide assistance to millions of people for preventing the foreclosure of their properties.
The loan modification program takes into account the current income of the loan borrower and tries to bring down the mortgage payment to a level affordable by the payee.
To serve this purpose, the bank which is issuing the program gets into a negotiation with the concerned financial body or the institution and brings down the mortgage payment rates within the financial reach of the loan borrower.
In order to encourage the institutions providing the loan modification programs, the government has set aside a huge amount of financial resources which is to be offered as a cash reward or incentive to the institutions or firms which are offering such programs.
Under this scheme even the borrowers are given financial assistance in the form of incentives to speed up the mortgage repayment procedure.
The various steps needed to initiate by the applicant in order to qualify for mortgage modification programs are: 1.
Before applying for such a program, the applicant must provide a detailed description of his current financial status and must submit all the required documents to serve the purpose.
2.
After the submission of the documents, the loan officer would carry out a complete survey and analysis of all your financial spending which might include all types of loans, involvement in a support program and also the use of credit cards.
3.
If this analysis indicates an excessive monthly spending by the applicant over the ratio of 55% of his monthly income, then he would be given guidance and assistance by a house counselor recognized by the government.
4.
One of the essential criteria required to qualify for a mortgage modification program is that the applicant must be residing in the concerned house and it must be his sole property.
If it is found that he is renting out another house to tenants on a monthly rent basis then he would not qualify for a loan modification program.
5.
Your first payment of mortgage must be under a required margin and also the payment should have been made before January 1st, 2009.
6.
Only certain types of loans such as prime, subprime and adjustable loans can qualify for this program, while the applications for VA or FHA mortgages will be turned down.
7.
The first payment made by the applicant for his first mortgage including the interest, principal and other taxes taken into account should more than 31% of his monthly income.
8.
To take care of all your property taxes, a loan officer will arrange an escrow account after your application for a loan modification program has been accepted.
9.
The type of modification program which would be given to an applicant depends on his gross monthly income as well the level of equity he has.
Certain type of programs will be perfectly suited for those with a high monthly income while of the programs would be more suitable for those with a larger equity.
10.
To be successfully accepted by a loan modification program, the applicant must provide all the essential documents to support the financial figure quoted by him.