In early 2010, a remake of the loan modification program, Making Home Affordable, has gained acceptance from the four major lenders. Its forerunner, unfortunately, fell short of performing as per the intentions of President Obama. Foreclosures continued to the point where 250,000 homes were added to those already in default as 2009 came to a close. Modification Program Needs to be Modified The original program provides for a 3-month trial period that could extend another 30 days for processing the modified mortgage loan. While this is happening, there are no payments applied to the original mortgage. This means that the homeowner is accumulating non-payments, fees and penalties. If the borrower was not in default before entering this program, that home will definitely be in default by the time a trial period reaches its third month. Early in 2010, this program modification became available. The first goal of the program was to gain commitments from the four major lenders: Bank of America, Chase, Citi and Wells Fargo, There are new incentives that should encourage their participation. All of the program provisions from 2009 still exist for the homeowner. The modification is now reaching out to a vulnerable group of homeowners left out of the original program. FHA and the TARP Program This program now extends to homeowners with loans guaranteed by Federal Housing Administration (FHA). Newly targeted homeowners are unemployed or have underwater loans ... or both. Part of this group will be offered time to recoup their financial health without making payments for a period of 3-6 months. Another option is that their payments would be lowered for a similar period of time. Troubled Asset Relief Program (TARP) will set aside $50 billion to fund this initiative. This program cannot possibly help every person who asks for it. First priority will go to the responsible, struggling homeowner in this situation through no fault of their own. Mortgage payments that exceed 31% your income due to subprime, adjustable rates and programs will be top priority as long as the remaining principal balance is less than $720,750. Homeowners must be able to verify their financial hardship. Lender Incentives Under this program, lender incentives are higher when a delinquent loan principal is lowered. Bank of America has indicated that they intend to cut principal on adjustable rate or underwater mortgages. A borrower does not have to miss one or more payments to qualify to participate. The anticipated default by a homeowner is enough to receive federal assistance. Also, this modified program includes the homeowner with a second mortgage. Previously, the homeowner could be good with his primary mortgage and still be foreclosed if they default on second mortgage payments. The Big Four have made commitments to participate in the 2MP part of the program. 2MP is the modification program for those homeowners with second mortgages. Modification Goal Making Home Affordable should be able to curb the crisis of foreclosures, although the program is subject to scrutiny by the public until it proves its worth. Applying the program to homeowners with second mortgages is in the hands of the major lenders. If they honor their commitments, this program should meet its goal of slowing foreclosures. Hopefully, this will be the home ownership reality of the future.
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