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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

The July 17 deadline for cities and nonprofits to apply for their share of nearly $2 billion in Neighborhood Stabilization Program funding. A new report from PolicyLink, a national research and action institute advancing economic and social equity, detailing how some states and cities are dealing with foreclosure may provide some inspiration for those who have still not applied and hope for communities suffering from blight or plummeting property values.

“As foreclosed properties fester, communities are reeling from blight, crime, and property value decline,” said Kalima Rose, co-author of the report and Director of the PolicyLink Center for Infrastructure Equity. “Thankfully, some proven strategies are showing communities how to reclaim their housing stock and get their cities back on track.”

The report, “Reclaiming Foreclosed Properties for Community Benefit,” features several of the most promising practices and stories from communities around the nation including:

Creating Community Land Trusts

Land trusts have been very successful at securing vacant properties and ensuring they remain affordable for years to come. For instance, in Providence, RI, city and state leaders acquird foreclosed properties in two of the hardest-hit areas and put covenants on their sale to ensure they remain affordable for decades.

Marketing Foreclosed Homes and Offering Tax Incentives to Buyers

Some cities whose housing markets are still functioning have been able to attract new buyers to foreclosed properties. Boston offer potential buyers a trolley ride tour of foreclosed properties while Los Angeles has hired marketers to tour the benefits of buying foreclosed homes. Other cities offer low-interest loans or tax incentives to attract buyers.

Increasing the Cost for Owning Vacant Foreclosed Properties

Owners of foreclosed properties are often large investors waiting for the market to revive. Meanwhile, their properties fall into disrepair. By imposing taxes or fines on properties remaining vacant for more than a year, some cities and towns can change the incentive structure making it easier to sell the property to someone willing to fix it up and live in it.

Rehabbing or Demolishing Vacant Properties

In Cleveland, OH, community leaders have started a pilot program to identify properties in six neighborhoods that can be rehabbed and demolish ones that cannot. Getting new homeowners into salvageable properties and saving the upkeep and repair money on non-salvageable properties reduces the burden for local government. Other cities having excess housing stock and low demand are following suit.

In addition to the new report, PolicyLink’s “Equitable Development Toolkit” is a key resource for community leaders, advocates and residents advocating for more equitable communities.

Related posts:

1. Cities in the Sunbelt see the most foreclosure activity in 1Q 2009
2. Squatters and Foreclosure: Who Lives Here?
3. One million foreclosure landmark a boon for some buyers

Related posts:

1. Cities in the Sunbelt see the most foreclosure activity in 1Q 2009
2. Squatters and Foreclosure: Who Lives Here?
3. One million foreclosure landmark a boon for some buyers