Qualifications for Mortgage Modification

A mortgage modification may be a last-ditch effort for a number of homeowners, who have fallen on hard times and fear a future foreclosure. Qualifications for mortgage modification were implemented by the Treasury in conjunction with the Obama administration. These qualifications serve as general guidelines to participating banks, and they represent a minimum standard these financial institutions must follow when working with debtors. Banks may have their own guidelines as well, making it more complicated for homeowners to participate in the planned stabilization of the housing market. Read on and learn about the qualifications, the program of which they are a part, and also learn about the expiration date of the federally instituted mortgage modification program.

History

The current set of qualifications for mortgage modifications dates back to the Homeowner Affordability and Stability Plan, signed in February of 2009 by President Barack Obama. A copy of the executive summary is referenced in the Resources section.

Time Frame

Having begun in early 2009, the program will expire on June 10, 2010. If you hope to meet the qualifications for mortgage modification, the bank must receive your completed paperwork prior to that deadline.

Function

Banks participating in the president's mortgage modification program set forth a list of qualifications you must meet. The goal is to separate the responsible homeowner--who may have fallen on hard times--from the homeowner unlikely to be able to make payments, even after signing a modification deal.

Effects

The Obama administration estimates that the Homeowner Affordability and Stability Plan will assist upward of seven to nine million homeowners, who are facing tough economic times and are struggling to hold on to their homes. The qualifications for mortgage modification open the doors to loan restructuring or even refinancing, so that monthly house payments drop and become affordable.

Identification

Qualifications for mortgage modification help identify eligible homeowners. According to the government's Making Home Affordable program, a homeowner may only apply for a loan modification on a primary residence with a mortgage of less than $729,750. In addition, the mortgage needs to have been written before January 1, 2009 and must currently demand a payment that is more than 31 percent of the borrower's gross income. You may include your property taxes and homeowner's insurance in the payment total, which is oftentimes already the case for borrowers with an impound account.

Misconceptions

It is a common misconception that any consumer meeting the qualifications for mortgage modification will be issued one. Keep in mind that this is a voluntary program that not all banks participate in. Moreover, those that do participate in the plan still have certain credit guidelines they set. For example, if you are a borrower with negative cash flow on a monthly basis, you may not be offered a home loan modification simply because your debt-to-income ratio makes it unlikely that you will meet your fiscal obligations.

References

• Scribd.com: Home Affordability and Stability Plan Executive Summary from 02-18-09
• MakingHomeAffordable.gov: Loan modification eligibility information

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