America’s New Loan Modification Plan

The United States economy is under extreme pressure; because of this, loan modification has been created. Almost six million homeowners currently face foreclosure and the recession is mostly to blame; consumer spending is way down as well.

To fight these circumstances, the Obama administration has formulated an organized and well-examined economic stimulus proposal for loan modification that, if suitably used in the home market system, will produce a noticeable stimulus to the economy.

According to Obama’s Home Mortgage Plan, every new homeowner should be able to have an interest rate of just 4.5% and a 30-year fixed rate mortgage on their home. Current homeowners should be able to refinance at an interest rate of 4.5% if they choose.

Unlike refinancing, loan modification does not start the process of a new loan. It is simply a change in the conditions of the existing loan. There are even some great incentives to encourage lenders to participate in the loan modification process. These incentives include:

1. The borrower’s expense will be lowered from 38% of gross income to 31% because the government will assist lenders with the cost of a loan modification.

2. For as many as 5 years, the borrower will get $1,000 a year for the balance that is left on the loan.

3. The lender will get as much as $1,500 in return for a qualifying loan modification.

4. The complete government allotment per home could be up to $10,500 for this program.

The following are some advantages that come with the Obama Loan Modification Plan to the Economy:

1. People will save money through the reduced interest rate they will receive upon qualifying for a loan modification plan.

2. Borrowers are encouraged to choose to utilize this program with offers of cash incentives.

3. The program guarantees $1000 when you accept the original loan modification as well as $1000 for 3 years. However, this is on the condition that you are not late on your payments and don’t go into default.

4. Also, the program plans to lower the interest rate and raise the term of the loan, if the desired percentage of gross monthly income isn’t met.

As with just about any loan, you need to fit certain criteria to qualify for a loan modification plan. Two things are very important to qualify: You must be the prime resident of the home and your loan should not date further back than January 1, 2009.

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