Mortgage loan modification helps

Since August, the number of owners offered loan modification programs has doubled, reaching 919,965 in October. This makes up around 29 percent of the eligible programs as per the Treasury Department on its monthly report. This benefit is extended to those who are able to pay three months of repayments without delay or default on the trial phase of 3 months. Since April, the government has extended this benefit to around 650,000 borrowers. California leads the pack with highest trial modification program numbers, followed by Florida.

It is believed, however, that almost 80 percent of those who need help haven’t received it yet. This help would eventually stop these borrowers from turning delinquent and prevent foreclosure. Lenders are trying their best to get more into the trial mortgage modification program. In the year 2009, lenders other than the government machinery have extended the mortgage assistance program to nearly 2.3 million owners according to Hope Now. These programs would include different options like modifying loans, repayment plans, reducing principal amounts, forbearance.

There are many assistance plans working outside the government’s requirement mandates. Bank of America, for instance, has covered 14 percent of the eligible population with default payment terms of 60 or more days under the government’s modification plan. This number has reached 136,994. Under its own program, Bank of America has offered modification programs to close to 450,000 customers since 2008. This year the bank has completed the loan modification for around 220,000 homeowners. What this essentially tells us that the system is working for many homeowners that might otherwise be facing foreclosure.

As per the Home Affordable modification program guidelines of March 2009, the lenders have to reduce the mortgage payments to a 38 percent debt to income ratio at the front end. The treasury will match this offer by a 31 percent reduction for the borrower. There are preconditions to avail the program, which include that the occupancy should be a single family, that it should be primary residence and that the unpaid balance on the principal is $729,750 or below for a single unit. The borrowers who are bankrupt or are in litigation are not disqualified from this program.

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