Too Far Underwater? Then You May Not Qualify For a Loan Modification

by admin on February 20, 2009

This new foreclosure prevention program is going to be a savior for some people and for others it wont’ have much affect. It’s still unclear which homeowners will be the big winners as the full details will not be released until March 4th, but right now it looks like if your loan exceeds 105% of your home’s value, you may not qualify for this new program.

Many people are understandably disappointed that this plan will pass them by and the alternative for most of them is unfortunately foreclosure. Not everyone will end up in foreclosure, there may be ways you can work out your own deal with the lender if you take matters into your own hands. For people living in Orange County, Phoenix, Miami and some of the other hardest hit areas, it may be difficult to understand a program as massive as this one that not ending up providing much benefit for their communities. The reason it might not be as much help to these areas is that many of the loans their are way over the current value. This is tough for many people to swallow – though it can be argued that many homes do need to go into foreclosure, it is the natural way that the market deals with people that can no longer afford their primary asset.

People that can afford to make their payments (that is if your mortgage is less than 31% of your income) should not plan to receive any benefits from this foreclosure plan as announced. Some people are considering walking away from their homes and leaving the lenders with the house in a sort of quasi fast forwarded foreclosure.

If you own your house outright or you currently rent an apartment, your tax money will be going to subsidize many homeowners who can no longer afford their mortgage. This is one of the toughest parts of the plan as certain individuals will definitely get rewarded at the expense of people who feel they did the right thing.

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