The federal government has worked with banks and other lenders on a mortgage modification program that will reduce the monthly mortgage payment for qualifying homeowners. The Obama Administration enacted the Making Homes Affordable program out of recognition that the current recession has had grave effects on the ability of many hardworking Americans to stay in their homes. The mortgage modification program strives to protect homeowners who have been making a good faith attempt to pay their bills, but need help to stay out of foreclosure. This article will discuss the eligibility for the mortgage modification program under the Making Homes Affordable program.
In order to be eligible, the mortgage has to be for a primary residence, and must have been taken out before January 1, 2009. The principal balance on the principal mortgage must be equal to or less than $729,750. Furthermore, the monthly mortgage payments must be at least 31% of the borrower’s current gross income, which does not include taxes.
Most importantly, there has to be a reason that a homeowner needs help. Many Americans have lost their jobs or took severe pay cuts to keep their jobs. Decreased income makes a person eligible to take part in the Home Affordable Modification Program. Hardships such as high medical bills are also sufficient reason. Lastly, if a mortgage payment has gone up dramatically as part of an interest rate reset or a negative amortization mortgage, that would also be a sufficient reason to be eligible for the mortgage modification program.
However, eligibility is not enough to get a borrower qualified under the program. An eligible borrower needs to show that they would be able to continue making payments in the future if their mortgages were modified. If a borrower is not going to be able to make payments on even a dramatically reduced mortgage, the mortgage servicer has the right to reject his application and pursue foreclosure instead. That puts a borrower in a tough situation, because they need to be in trouble in order to participate in the program, but if they are in too much trouble, they cannot get qualified for a mortgage modification.
An important aspect to keep in mind is that there is no requirement for the borrower to actually have missed a payment before participating in the mortgage modification program. A proactive borrower can seek modification of their mortgage if they lost their jobs, or suffered some other event that makes them eligible for the program. Early intervention helps prevent the borrower’s financial situation from deteriorating to the point where he would have to miss a payment and risk foreclosure.
The Making Homes Affordable Program allows mortgage modifications that help borrowers who took out a mortgage for their primary residences, and who suddenly lost their jobs, or had their mortgage payments skyrocket, or who suffered hardships such as medical bills. There is no guarantee that everyone eligible for a modification will qualify. However, being proactive on the matter would help borrowers keep their homes.