Loan modification: Are you eligible?

You may have heard talk about “loan modification” in connection with home mortgages.  But how do you know if you’re eligible?

First off, loan modification generally refers to the process of trying to change some of the terms of your mortgage, such as your interest rate, reducing penalties for late payments, the term of the loan or the principal.

But these days it often refers to the Making Home Affordable program (http://www.makinghomeaffordable.gov), the federal government’s loan modification program which was announced by the Obama administration in March 2009.  The government created financial incentives for mortgage lenders to encourage the mortgage lenders and banks to offer loan modifications to homeowners who meet certain conditions.

What are those conditions?

1. You have to actually live in the home that is the subject of the loan modification.
2. You must already be late with your payments.  Or alternatively, you can try to demonstrate that you face imminent financial hardship.  (Maybe you just lost your job or incurred some other major unanticipated expense.)
3. The remaining balance on your mortgage can be no higher than $729,750.
4. There’s a requirement that you make the new payment for a 3-month period in order to qualify.

Not every homeowner meets these conditions.  But if you do, then you can get substantial reductions in your interest rate and monthly payments for the next 5 years (after which your mortgage goes back to its original terms).

For more information about qualifying for a loan modification or other alternatives to bankruptcy attorney Brooklyn NY, please feel free to contact me for a free initial consultation.