- The Home Affordable Modification Program is designed to encourage mortgage lenders to lower the home loan payments of homeowners who are struggling with a financial setback. Under the program, the government provides lenders with a financial bonus every time they modify a mortgage loan. Lenders can reduce homeowners' monthly payments by lowering their interest rates, forgiving a portion of their principal balance or reworking their loans' terms. To qualify for a modification through this program, homeowners must have taken out their loans on or before Jan. 1, 2009, and most owe $729,750 or less on their home loans. Their monthly mortgage payment must also be 31 percent or more of their gross monthly income.
- Homeowners can save significant dollars each month by refinancing their mortgage loans to ones with lower interest rates. Most lenders, through, require that homeowners have at least 20 percent equity in their homes before they'll grant them a refinance. In a market in which home values have fallen, many homeowners won't have this 20 percent equity. The government's Home Affordable Refinance Program, though, can help them. Under this program, homeowners can qualify for a refinance even if they owe up to 125 percent of their home's value on their mortgage loans. As an example, a homeowner with a residence valued at $100,000 can qualify for a refinance even if she owes up to $125,000. To participate, homeowners need to be paying off a loan owned or guaranteed by Freddie Mac or Fannie Mae. They must be current on their mortgage payments. They can't participate if they have been more than 30 days late on a payment during the last 12 months.
- The Second Lien Modification Program is designed to help homeowners who have not one but two mortgage loans. This program encourages mortgage lenders to lower the monthly second mortgage loan payments of struggling homeowners. To qualify for this program, homeowners must first have completed a modification of their primary mortgages through the Home Affordable Modification Program. Their second mortgage loan payments must be more than $100 a month, and they must owe more than $5,000 on their second loans.
- To take advantage of any of these government assistance programs, homeowners need to call their existing mortgage servicing companies, the companies to which they are already sending their monthly mortgage payments. The federal government may offer these programs, but it is not modifying any loans on its own. The government reserves this work for private mortgage companies.
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