Question:

What is Obama's mortgage modification plan and who qualifies for it?

Answer:

Barack Obama's mortgage modification plan has people from all aspects of life asking whether they qualify for it or not. In this article we'll try to shed some light on the subject.

The Obama mortgage modification plan basically has two portions catering to two categories of homeowners.

  1. Delinquent homeowners who are not able to make payments and are at risk of defaulting.
  2. Homeowners who are able to make payments but can't refinance their loan because of the value of the house becoming lesser than the mortgage.

The government will act to modify the existing mortgage of the first category homeowners and provide assistance in refinancing to the second category homeowners.

Qualification for Obama's Plan

If you think you belong to the first category you should check whether you fulfill the following conditions:

  • The loan must have been secured before 01 Jan, 2009
  • The value of the mortgage must be less than $729,500
  • The house must be your primary residence
  • You must present full disclosure of income tax documents
  • You must sign a statement of financial hardship
  • You must seek counseling if your back end debt ratio* is more than 55%

* The back end debt ratio is the ratio of your monthly debt payments to your income

If you think you belong to the second category you should check whether you fulfill the following conditions:

  • The house must be your primary residence
  • The mortgage must be owned by Fannie Mae or Freddie Mac
  • Show enough income to support the new mortgage payments

How Is Your Existing Mortgage Modified?

To the homeowners in the first category, the following will be granted:

  • The lender will reduce your payments to be equal to 31% of your income
  • The interest rate will be very low (down to 2%)
  • No mortgage modification fee will be charged by the lender
  • For every timely monthly payment, the US treasury will reduce the principal on the loan up to $,5000/-

To the home owners in the second category, the following will be granted

  • The mortgage will be refinanced over 15 to 30 years
  • There will be a fixed interest rate*.
  • Only interest payments will be reduced (Nor reduction in the principal)

* The rate will depend on market rates and any fees of the lender

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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