Mortgage Modifications Law
In 2009, the federal government put the Making Home Affordable plan into action. Through MHA, distressed homeowners can apply for a home loan modification through their lenders and have those applications reviewed based on government rules rather than lender-specific standards.
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Function
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MHA offers both a loan modification and loan refinancing program for eligible borrowers. The program aims to help borrowers obtain mortgages they can comfortably afford, thus reducing the foreclosure rate.
Significance
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All lenders who sell their mortgage packages to Fannie Mae and Freddie Mac must abide by the MHA guidelines and offer loan modifications. Once a borrower submits an application, his lender has 30 days to review the application and notify him of whether or not he qualifies to modify his mortgage loan.
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Considerations
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According to Freddie Mac, most homeowners cannot comfortably pay mortgage payments if the payment itself meets or exceeds 31 percent of their monthly income. Thus, individuals whose mortgage payments equal more than 31 percent of their income may qualify for a modification. Other qualifying factors include when the homeowner received the loan and if the individual is currently facing a financial hardship such as a job loss.
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References
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