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Providing loan modifications to those that need them and are eligible according to the current criteria is the goal of the cash happy loan modification aid program.

The goal is to keep out scammers and those who wish to take advantage of the system while not letting the “deserving” fall through the cracks. This is an ambitious goal. As we have discussed in previous blogs making good rules that keep out the cheats and welcomes the eligible is very hard.

Here is the current ten point criteria for loan modifications:

1.)    Loans must be conforming conventional loans or conforming jumbo mortgage loans and they must have been contracted before January 1, 2008. What is a “conforming” loan is changing all the time.

2.)    You must be three payments past due. This requirement was happily dropped. You don’t need to be behind in your payments although you must be able to prove you can’t pay your mortgage payments but could afford those of a modified loan.

3.)    The loan is secured by a one-unit property and must be the borrower’s primary residence.

4.)    The current mark to market LTV must be of 80 per cent or more.

5.)    Property must not be abandoned, vacant, condemned or in serious disrepair as well as being the borrowers primary residence.

6.)    The goal of the loan modification is to reduce monthly payments to 33% of the homeowners monthly income. In order for this to occur, servicers may:

7.)    Capitalize accrued interest, escrow advances and costs as far as state law allows.

8.)    Extend the term of the mortgage (tenure) by up to 480 months (40 years).

9.)    Reduce the mortgage loan interest rate in increments of .125% to a fixed rate of no less than 3%. If this causes the rate to be below market rate it will step up in annual increments  to a market rate after 5 years have passed.

10.)    As a last resort eligible borrowers will be provided principal forbearance which will result in balloon payment. This means payments will be kept low while the big money is paid when the house is sold or the loan matures.

Some of the points of this criterion are under their third or even fourth revision so checking for accuracy is wise. The key criteria is to be able to afford the reduced monthly payments. If you can’t afford a reasonable loan modification there is little hope. This does not mean unemployed borrowers are automatically barred from loan modifications but they must provide some proof of income or prove they are likely to find employment soon.

The methods the government suggests to reduce monthly payments are rather bold which explains why many banks are doing their best to drag their feet as in many cases it actually costs them money to provide the loan modification.

Related posts:

1. Loan Modifications Only Hope For American Dream
2. Loan Modifications, The Truth Behind The Spin
3. Loan Modifications, lies, scams and misinformation

Related posts:

1. Loan Modifications Only Hope For American Dream
2. Loan Modifications, The Truth Behind The Spin
3. Loan Modifications, lies, scams and misinformation

FHA loans are back as good business.

The Federal Housing Administration guaranteed almost 186,000 mortgages in June, a record tally for the agency, which has insured more than 34 million properties since its establishment in 1934.

First-time homebuyers are in part driving the record push. Since late May, prospective purchasers have been able to use the $8,000 first-time homebuyer’s tax credit on FHA-backed loans.

Part of the American Recovery and Reinstatement Act of 2009, the tax credit allows first-timers to pay for closing costs or even defray the 3.5 percent minimum down payment on FHA loans.

These long-standing loans continue to grow in popularity given the slumping economy and tight credit market. The FHA’s record performance in June smashed the agency’s old record of about 157,000 loans in October 2008. Before that, the record dated back to March 1994.

“A primary reason government-insured loans have retained a high share of the purchase market is that these loans typically require lower down payments than conventional loans,” Orawin Velz, associate vice president of economic forecasting for the Mortgage Bankers Association, said in a news release. “In addition, lending standards tend to be tighter for conventional loans, especially for loans that require private mortgage insurance.”

FHA loans represent an affordable avenue for many first-time buyers. Anyone who has not purchased a home in three years gets that “first-time” status. But there are some strings attached for buyers looking to capitalize on the new $8,000 tax credit.

Prospective borrowers hoping to offset their down payment costs must utilize a proper FHA-approved lender. Otherwise, that $8,000 can be put toward closing costs or shaving down interest rates.

First-time homebuyers also must meet a handful of other criteria. There are income thresholds that exclude individuals who make more than $75,000 or joint filers who clear $150,000.

At present, first-time buyers can also decide when to claim the tax credit – either for 2009 or by filing an amended 2008 return.

About a dozen states have started offering bridge loans to help spark home buying. These low- and zero-interest loans have to be repaid when the tax credit is applied. The FHA has also begun offering tax credit advance for prospective homebuyers who do not want to wait.

This post was written by Brandon Laughridge of Mortgage Loan Place.  MLP specializes in educating consumers about all types of mortgage loans with an emphasis on government mortgage programs such as FHA refinancing and VA Loans.

Related posts:

1. Blown Purchase Loans
2. Credit Series Part 2: Elements of Credit
3. The REAL Truth About No Cost Loans

Related posts:

1. Blown Purchase Loans
2. Credit Series Part 2: Elements of Credit
3. The REAL Truth About No Cost Loans