What Is the Law for Loan Modification?
The federal loan-modification program offers incentives to lenders to help homeowners avoid foreclosure by lowering their monthly payments. Under this new program, lenders can cure defaults and bring payments back in line by lowering interest rates and potentially reducing principle balances.
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Default
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Loan modifications can only be performed on loans that have defaulted. If you are not currently 30 days or more behind on your mortgage, you will not qualify.
Residence
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The program can only be instituted for mortgages on homes where the borrower lives as a primary residence. Second homes, investment properties and commercial real estate do not qualify.
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Origination
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Only mortgages originated on or before Jan. 1, 2008 are eligible for modification.
Finances
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The monthly mortgage payment must exceed 31 percent of the household gross income. This is the income you receive before taxes. This also does not take into account other debts that the homeowner will have to pay.
Eligibility
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Lenders make the final decision regarding the eligibility of your loan for modification. Contact your lender as soon as possible to determine your eligibility, and begin the process if you are behind on your mortgage payments.
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