Sunday, November 16, 2008

Loan Modification Program Offers Help to Homeowners

Seriously delinquent borrowers may be eligible for a loan modification program that offers to change their unaffordable home loan into one that features lower payments. The program, guaranteed by Fannie Mae and Freddie Mac, is targeted to delinquent homeowners to help them stay in their homes and avoid foreclosure. The program could also serve as a model for reworking hundreds of thousands of troubled loans owned by other financial companies.

The new loan modification program promises to quickly move homeowners into long term sustainable mortgages. Although this is a step in the right direction, it is still falls short of what is needed to achieve the wide scale modifications of troubled loans. Not all borrowers will qualify for this loan modification program. Here are the basic guidelines for the streamlined loan workout a borrower must meet:

  1. Only for principle residences-borrower must live in the home
  2. Must be 90 days delinquent on loan payments
  3. 38% debt ratio for new housing payment
  4. Loan must be owned by Fannie Mae or Freddie Mac

The new payment would be accomplished by one or several of the following options:

  • Extend loan term to 40 years
  • Reduce the interest rate-temporarily or permanently
  • Exclude part of the principal balance when figuring the monthly payment

The last option, known as principal forbearance, allows for a portion of the amount owed by the borrower to be set aside, with no payments due, until the house is sold or refinanced. A general guideline could be to lower the loan balance that the new payment is calculated on to represent 90% of the homes current appraised value.

The debt ratio requirement of 38% for the new payment offered with this loan modification program is the key factor in determining which borrowers will qualify for help. Homeowners must provide financial statements itemizing income and expenses as well as provide proof of their income for review. Once the lender receives and reviews the information provided by the borrower, a decision will be made to approve or deny the loan modification application.

The new loan modification program is set to begin December 15th and is designed primarily to speed up mortgage workouts. For homeowners who are already in foreclosure, more help would be available to find a quick resolution. Troubled homeowners who would like to find out more about their loan modification options can do their own research to gain a better understanding of the loan modification process. Since not everyone will qualify, it is worth the time and effort to find out how to complete the required application paperwork properly to increase the chance of approval. Knowing how to complete the paperwork properly, including presenting acceptable financial statements that meet the debt ratio requirement is very important to obtain an approval.
Thousands of homeowners have already gotten help with a loan modification program.

You can get the help you need to understand the mortgage loan modification program by ordering and downloading The Complete Loan Modification Guide. This is a low cost, easy to read handbook that will provide you with everything you need to prepare a professional and acceptable loan modification application. You are provided with all of the necessary forms and given detailed directions on how to complete them properly. The Complete Loan Modification Guide will take you step by step through calculating your debt ratio, completing the financial statements, writing your hardship letter and then putting it all together to submit to your lender. Get started today on the path to secure home ownership, order and download The Complete Loan Modification Guide. For more information about mortgage loan modification, please visit us at:

Article written by: Susan V. Gregory - 25 years of finance experience, retail and wholesale, residential, commercial, business, fleet automotive. Principle of Route 55 Consulting offering financial services, insurance services, loan modification assistance, credit counseling.


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