The “Making Homes Affordable Program” was initiated to help those who are in default, foreclosure, or even struggling to make payments on their mortgage by offering loan modifications that will help the homeowner stay in their homes.
Who can qualify for a loan modification?
Those who are eligible for loan modifications have to prove that they are living in the home, struggling to make payments but earn enough to make them. The monthly housing payments, including principal, interest, taxes, and insurance have to exceed 31% of your gross monthly income. However, if all of the debt, including mortgage, credit card, and auto bills exceed 55% of the income, then the participant will have to work with a credit counselor.
The loan amount restrictions are $417,000 in most areas and up to $729,750 in higher-cost areas.
Which Lenders have to participate?
Most lenders are expected to participate and those who receive bailout money will be required. The banks will have to take a look at all loans that have been in default for more than 60 days and figure out whether it will cost more to foreclose or to modify the loan. If it is cheaper to modify then they must do so. If it is less expensive to foreclose then they have to try a less severe option such as consider another modification, short sale, or deed-in-lieu.
In the past, one would have to be behind on a mortgage payment for a lender to even consider a modification, however, the good news is that the “Making Homes Affordable Program” does not require this, making it possible to get help before the homeowner’s credit is hurt.