In order to avoid millions of people losing their homes in the face of the current economic situation, loan modifications will be made in cases where it may have before been impossible. A loan modification is when one or more of the conditions of the loan are changed. In this case, under the Home Affordable Modification Program has several built in guidelines that make it a win-win situation for the borrower and the lender. The most significant advantages to the borrower will be the modification itself which will allow them to keep their home but also lower payments and incentives for paying on time.
There will be outreach programs funded so that home owners can find out if they qualify for loan modification and get answers to any questions they may have about them. The program will be strictly monitored as well with regular meetings with the lenders and the treasury department. This will help lower the chances of anyone falling through the cracks (if any) in the program.
Every servicer participating in the program will be required to report standardized loan-level data on modifications, borrower and property characteristics, and outcomes. Servicers are given incentives to find alternatives to foreclosures which makes it a promising aspect to lenders. Such methods reduce vacancy, neighborhood decline, and overall costs for financial institutions, borrowers, and affected communities alike.
There will be order and consistency within the loan modification programs within the federal and the private sector which furthers the chances of success. Every effort is being made to ensure that loan modifications are not only available but prove to be practical once applied. Due to these new guidelines millions of people will be able to keep their homes that otherwise they would have lost through foreclosure. The safety nets and close monitoring can bring peace of mind to both borrows and lenders.
With the new federal guidelines, people with HUD homes, for example may have lost their homes because the home value had been reduced through recent Fannie Mae and Fannie Mac troubles as well as an unstable economy. Those people are now eligible for loan modification to change the terms of their loan and also reduce their monthly payments to within 31% of their income. Continue reading