Obama Mortgage alteration Plan – What Happens After 5 Years? Does th…

Obama Mortgage alteration Plan – What Happens After 5 Years? Does th…

The Obama mortgage alteration plan has very strict guidelines for approval and a standard method of modifying loans for struggling homeowners.  Financially strapped borrowers need to learn just what is involved in this Federal loan alteration plan before they begin the application course of action.  Just what is involved in applying and qualifying for this aggressive loan workout and what do homeowners need to look out for?

If you are interested in applying for help using this government alteration program, you will have to go by a screening course of action to determine if you are eligible.  If you can meet the basic requirements, then you may prepare your application and submit it for final review.  Once your bank approves your application, your loan will be alternation using a standard method of loan adjustments designed to give you an affordable mortgage payment.  These methods include:

  1. Reduce interest rate to as low as 2%
  2. Extend loan term to 40 years
  3. Defer or forgive principal balance

The goal is to arrive at a new loan payment that equals just 31% of your gross monthly income, and will be affordable now and in the future.  You will have demonstrate your ability to pay and continue this new payment however, before the loan alteration will be made long-lasting.

90 Day Trial Period :  The alternation payment will have to made on time for 90 days during a trial period.  Once this period is over and there are no delinquencies, the alteration will be extended for 5 years.  You must make all of the payments on time during this second time period in addition.  What happens after the fifth year?

If your alternation interest rate is below the current market rate on the day of your original loan alteration-say your new rate is 3%-then you may see your interest rate increase at the rate of 1% per year, until it reaches the market rate.  For example, on the day your loan alteration was granted, the prevailing Fannie Mae interest rate was 5%-beginning in year six your loan rate would be increased by 1% per year until it reached the 5%.  These terms are disclosed and written into your new mortgage alteration agreement.

Obama’s loan alteration plan is one of the most aggressive loan workouts obtainable to qualified homeowners.  Successful applicants must be able to prove in black and white that they meet the guidelines.  How can you make sure you have the best chance of approval?  The secret to success is to know and understand how to complete your application correctly so that you meet all of the criteria.  Do NOT contact your lender to apply until you work on your loan alteration forms and have made any necessary adjustments.  You do not want to make a mistake and miss out on this chance to get the lower mortgage payment you need.  It’s simple-those homeowners who can prove they meet the approval guidelines will get help-those who don’t will be denied.  Learn the guidelines, work on your application, make adjustments, then submit your application-it’s the smart thing to do.

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