To Stop Foreclosure – Obama Federal Loan Modification Plan – It’s Not a Success

Millions of people are rapt under the saddle of reducing incomes and property prices. Such challenges have made monthly payments thorny for most of them. The fear of Foreclosure is intimidating large over many. Apparently, if you qualify for the Obama Federal Loan Modification Plan – you are definitely amongst the lucky homeowners, who would be making lesser monthly repayments, recovering from debts soon and in turn making some savings too. More money than ever is being offered to struggling homeowners by the Obama Administration: an amount over $ 75 billion that will be helping up to 5 million home owners if they qualify.

Presently under the United States Bankruptcy Laws, home owners cannot alter second mortgage loans protected by their homes. This Modification program offers a revision to the Bankruptcy Code allowing the Court to alter the terms of the mortgage on the basis of the cost of the property and the debtor’s ability to disburse the amount, therefore ceasing foreclosure. The plan is very beneficial to those who are facing problems paying their mortgage debts due to reduced income or sudden loss of job. The current economic challenges have left million of people reeling under pressure to arrange for the repayments. The key objective of the home loan modification program is to help people keep their homes by getting existing mortgages modified.

Under Obama Federal Loan Modification program, a borrower is able to get entitled to refinance the loan and cut the payments if they owe more than 80% of the cost of their homes. Generally a bank would not sanction a refinance as there is less than 20% equity in the home as calculated against the mortgages and liens on the assets. Apart from the above, the home loan modification program will assist, as well, those borrowers who aren’t in default of payment and whose loans are moreover held or guaranteed through Fannie Mae and Freddie Mac.

The advantages of the Federal HAMP Loan Modification program are that it helps the home owner by giving them modified loan terms and it becomes possible for them to carry on with the payments. The amount that will be paid under the home loan modification plan will include the insurance, taxes and the fees and not exceed 38% of gross monthly income. The Obama Federal Loan Modification program offers bonus and incentives to the borrowers as well as the lender. The loss of revenue to the lender is also shared by the administration when they lower the interest. The annual payment made by the home owner is under Obama’s Home loan modification plan is used to clear the principle amount.

However, in spite of such benefits available, it has not been made obligatory for the lenders to op for the Federal loan Modification. Therefore, a number of lenders avoid doing so because they are eligible for incentives only after they receive a payment of at least three months. Also, in such a case, the lenders would estimate the foreclosure cost to be greater than the federal loan modification cost; which is apparently not true and thus, lenders would choose not to go for the alternative. Above and beyond, no financial firm offers a refinance or a loan modification when there is less than 20% evenhandedness in the property share. So instead of making more customers eligible for the Home loan modification plan; it will draw a line with a larger number on the other side. Furthermore, the constantly depreciating property price again leads to a smaller number of people becoming eligible for the loan.

Surveys suggest that more than a majority of Americans would not be benefitting from the Obama federal loan modification program, even if gives the impression of being a highly advantageous plan that would be reducing the number of foreclosures. It is not that it’s a bad option, but one must review his own financial condition and then assess how to work out for the rest of the measures.