Loan Modification Program

by admin on February 14, 2009

The recession and global slowdown in economy is taking a big toll of the comfortable life style that many people had got used to over the last 3 years. Jobs have been lost and with ambitious mortgage loans taken and need to repaid, home owners have never had it so rough. Close to a million homes face repayment issues and are on the brink of foreclosure. People who have taken government backed loans are hoping that the Fed helps them with a program that will change the structure of these loans and provide some succor. For individuals with low and medium income, such a program will be a huge benefit.

Loan modification arrangements have gained momentum with creditors assisting borrowers who are having a tough time making their payments. Some of them are not accepting foreclosures till they can discuss with the borrower and work out something for mutual benefit. However, not all borrowers are benefited through such programs as the program entails the payment of some amount trickling in on a monthly basis and only then the borrower can hold on to the home. In a scenario where the borrower is really hard pressed for cash, he would not be able to make even this much reduced payment regularly. On the other hand, foreclosure would mean that the banks will have to spend time and effort to maintain those homes which they would not prefer.

Till some time back, such loan restructuring was taken up only by private banks and the government banks kept out of it. Now with both Fannie Mae and Freddie Mac in serious difficulty themselves, real estate backed by government loans is also being taken up and specifically those that are behind by more than two months and have not declared themselves insolvent.

The objective is to help people retain their homes while enabling them to make some payment that they can afford. The goal is to recover about 35% of the monthly earning of the individual. Many borrowers can meet this obligation by simply opting for a fixed rate of interest over an extended tenure from the floating rate that they were subjected to.

As a borrower struggling to make your repayment, it is your obligation to discuss with your creditor and work out a program restructuring your current loan to make it more affordable for you. With interest rates having dropped, this is a good time to go for a restructuring at a fixed rate of interest spread over more than 20 years.

Such a program currently would be in everybody’s benefit.

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