Home loan modification has recently become a hot topic in many American households. Though it was always possible to renegotiate the terms of a loan and have them adjusted by your lender, the process wasn’t commonly performed until the recent mortgage meltdown. Though modifications are becoming a lot more common now, there are still a lot of home loan modification myths surrounding the subject.
With the passage of the President’s new Making Home Affordable (MHA) plan, lenders now have a consistent set of steps to follow in the case of home loan modification. From March 4, 2009 until December 31, 2012 homeowners will be able to use the $75 billion Homeowner Stability Initiative to obtain home loan modifications.
Participating lenders are paid out monetary incentives for adjusting your loan, and those incentives often make a modified loan much more profitable than foreclosure or other alternatives. In this way, the MHA plan works to get 4 to 5 million Americans out of financial trouble and save their homes.
Surprisingly, though, there are a lot of misunderstandings and myths about the MHA plan. Many people mistakenly believe that the government is forcing lenders to participate in the plan. That is completely untrue. The MHA plan provides a consistent set of procedures for modifying loans and provides lenders with incentives to arrive at workable modifications, but it does not coerce lenders to do so.
The lender is advised to calculate whether the modified loan would be more profitable than foreclosure, and then to choose the more profitable option. The thing is, foreclosure is an awfully expensive, time-consuming, unprofitable affair for lenders anyway. Combined with the incentive payments provided under the MHA plan, lenders almost always decide that modification is a better alternative to foreclosure.
A second big misconception is that the Homeowner Stability Initiative money will be aiding speculators and house flippers. That is also completely untrue. To take advantage of loan modification under the MHA act, you must be the owner and the occupant of the home in question. Your home address is determined by a credit check. No vacant or condemned homes are allowed to participate in MHA loan modifications. Second homes and investment properties are also ineligible.
Of course there will be lots of home loan modification myths out there during this period of financial turmoil. MHA's new plan is new, and people are still learning how it works. Just educated and make sure to get a loan modification Facts plan under MHA.
