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Loan Modifications can seem complicated to many of us. Especially when we are dealing with the stress of losing our home and we are presented with a seemingly endless list of requirements and forms to cope with. It is easy when writing many articles on a specialized subject to assume that everyone knows what you are talking about, that everybody is familiar with what HAMP, TARP, a servicing company, short sales and foreclosures are.

If you are an expert in loan modifications what on earth are you doing reading an article titled Back To Basics, if not this article is for you. This article will explain the big picture loan modifications are currently set in and the basic terms you must be comfortable with.

Who is the owner of your mortgage? Knowing who owns your mortgage is vital. This is not as easy as it sounds. Often the bank or institution you bought your mortgage from is just a handler, a servicing company that sells mortgages and collects payments on behalf of an investor. We will not go into detail with how mortgages are bundled and sold but it is enough to say that it is probably more complicated than you expect so it pays to approach your lender or mortgage servicer with large amounts of patience and an open mind. It is also a good idea to become somewhat of an expert on the subject so you can at least ask the right questions and know when you are being taken for a ride.

The Programs.
Facing mixed feelings and responses from the public the American administration has started many programs and measures to modify loans and make them more affordable for troubled homeowners. There are two main programs, the HARP program (Home Affordable Refinance Program) and HAMP (Home Affordable Modification Program).

HARP is for homeowners that are current on their payments but have not been able to take advantage of the current lower interest rates because the value of their home has dropped and they are not able to refinance their mortgage. In order to qualify for HARP applicants must have mortgages owned or insured by Fannie Mae or Freddie Mac.

HAMP is by far the most widely used program. Any servicing company is eligible. The government provides incentives to investors and borrowers if a loan modification is successful. The purpose of HAMP is to bring mortgage payments down to 31% or less of a family’s monthly income. This program requires homeowners to have a job and be able to pay for a reasonable mortgage payment. The first step you must make with HAMP is to qualify for a three month trial loan modification. Once you have gone throught the three months without missing a payment you can qualify for a full loan modification.

HAMP reduces loan payments with three main methods: 1) Reducing interest, 2) Extending the mortgage term up to a maximum of 40 years and 3) Forbearance of principal and allowing for a ballon payment at the end of the mortgage.

Don’t pay for help, it is free!
It is importance not to fall for loan modification scammers no matter how much you hate paperwork. The best advice comes from the government and they have a vested interest in your success. You can call HUD for approved housing counseling at 239 434-2397 or visit www.hud.gov.

Related posts:

1. HAMP, Way Out For Delinquent Borrowers And Those Without Fannie
2. U.S Loan Modifications Hit Obama’s target Early But Nobody’s Impressed
3. Loan Modifications Only Hope For American Dream

Related posts:

1. HAMP, Way Out For Delinquent Borrowers And Those Without Fannie
2. U.S Loan Modifications Hit Obama’s target Early But Nobody’s Impressed
3. Loan Modifications Only Hope For American Dream

Mortgage modifications have received a lot of publicity in the media due and with good reason, millions and millions (4-5 according to government projections) will be left homeless if they don’t make appropriate loan modifications to their mortgages.

However that does not mean that loan modifications are only for the poor and destitute. We can all take advantage of the historic low interest rates and modify our loan or mortgage. Of course this is not an option that will help everyone, in some cases loan modifications cost more than they save and the only benefit they provide is to reduce monthly payments in exchange of a huge increase in interest payments throughout the life of the loan.

How can you can find out if your are eligible for a loan modification that will save you money?

1)   Check the cost.

It doesn’t get much more basic than this but it is vital that we check the price tag before we buy it. To illustrate you might have heard about companies that install solar panels to save money on your electric bill. I actually looked into one of these systems for my home and when you put figures onto paper it would have taken decades to cover the cost of my investment. I happen to believe that solar panels would be a great idea and that all new homes should be forced to have them, but you get my drift, before you “purchase” a product that provides a saving it is wise to work out exactly how much you are saving.

2)    Are you planning to sell soon?

Loan modifications take time to pay off the initial cost of purchasing the mortgage modification, often two to three years. If you are planning to sell soon you might lose money.

3)  Have you had your mortgage for a long time?

Mortgages are set so that at the beginning of the loan you pay most of the interest of the mortgage while paying most of the principal towards the end of the mortgage’s tenure. For example in the first 5 years payments tend to be broken up in 85% to pay for the interest of the mortgage and 15% towards the loan’s principal. If you modify your loan, your outstanding loan will be reset and you will begin to pay mostly interest with your monthly payments again. This could actually reduce your equity and provide little or no benefits. Therefore if you are in the final years of your loan it might be best to stay put.

Loan modifications are generally best suited for people who have recently bought the mortgage, are planning to own the home for a long time and who have excellent credit ratings. Nevertheless it is always a good idea to contact your bank and tell them you are seriously considering refinancing your mortgage, if you are a good customer they are likely to bend backwards to keep you on their portfolio whatever your circumstances are.

Related posts:

1. Mortgage Modifications, Mine Field Or Land Of Milk And Honey
2. Are mortgage modifications cost effective
3. Are Loan Modifications Worth your time

Related posts:

1. Mortgage Modifications, Mine Field Or Land Of Milk And Honey
2. Are mortgage modifications cost effective
3. Are Loan Modifications Worth your time