The typical purpose of a modification is to make your monthly mortgage payment affordable. An affordable mortgage payment is generally accepted to be 31% of your monthly gross income.
Variations of this program have been around as long as mortgage lending, since the late 1760s. There is no doubt that renegotiating loan terms has been part of our economy since then. It is fair to say that most borrowers start with the right income, the right down payment and the best of intentions. For some, changes occur so they can no longer continue to make the payments. This often leads to a discussion with the lender and sometimes ends with a new payment plan.
The most recent rendition involving loan modifications is encapsulated in the HAMP program, a US Federal Government program intended to help qualifying homeowners. It was introduced in 2009 as part of the Making Home Affordable Plan which was a plan to stabilize the housing market. Lenders are encouraged by the US Federal Government to work with the borrower to modify the interest rate, length of the loan or reduce the principal owed in some combination that makes the loan affordable to the borrower.
Even if you do not qualify under the terms and restrictions of the government-sponsored loan restructuring system, your lender may still be willing to have the discussion and work with you to explore other options. Communication with your lender is the key!
The worst possible outcome for borrowers in financial trouble is to simply do nothing and allow your lender to take your house in a foreclosure process and sell it on the open market in a public auction. Foreclosure will remain on your credit for 7 years, likely preventing you from returning to homeownership until then.
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Elegant Property Buyers, Inc.
25 Crescent Drive A-220
Pleasant Hill, CA 94523 USA