Mortgage loan modification programs are designed to help individuals repay their lender. These programs were created as an answer to the housing crisis that occurred due to the many subprime loans that were distributed and failed.
The inability to repay on money that was lent will effect the credit score of the individual as well as the company who issued the assistance. When an individual is in a situation where they cannot repay the amount of the loan granted to them they will often look to assistance to make it more affordable. Assistance programs can be helpful with repayment.
The process of modifying a loan is simple. However, there is a lot of paperwork involved so individuals will need to be patient with the process. When a person modifies their existing debt they are actually changing the terms and conditions of the existing agreement. This makes the process much different than a refinancing or debt consolidation, which will yield a separate loan.
The borrower will often have to qualify for this type of assistance before it is granted. The property in question must be in possession of the individual. That is, no one except the owner can qualify for this type of assistance. Additionally, the person wishing to borrow money must demonstrate inability to pay their existing debt. The borrower will give all tax returns to the lender for evaluation. If the borrower does not pay for three consecutive months than the modification can be undertaken.
In 2004 the Home Affordable Modification Program was introduced to the public. This is a federal program that is designed to help the consumer and make home loans more affordable. Individuals will often need to produce a letter of hardship in writing to the government in order to qualify. If the individual is approved than the modification will likely become active in the next month's payment. For very large mortgages there are some lenders that may require a trial period on the modification before it goes into effect.
The Federal Housing Commission, or FHA, also offers programs for those who demonstrate economic need. In order to qualify for this assistance individuals will need to be sure that the federal housing commission is their lender. The aim of this program is to expand the time period of the aid so that individuals have more time to pay it off. Additionally, the interest rate is often reduce, which in turn reduces the monthly payment.
To qualify for the program that the FHA offers the mortgage would have had to be activated before January 1, 2009. Additionally, the payment must be at least 31% of the overall income of the individual, the property must be a primary residence, it must be a first mortgage and the lender will need to be FHA approved. Individuals will also need to demonstrate economic hardship.
Mortgage loan modification programs can be a useful way for individuals to gain assistance with monthly payments. Individuals should be aware that there may be some tax implications for taking out this type of assistance. Individuals should have an understanding of all the consequences before pursuing this option.
Source: http://EzineArticles.com/6481993
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