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Owe More Than Your House is Worth?

Millions of homeowners have lost trillions of dollars of equity due to the housing crisis across the country causing continued foreclosures and wreaking havoc on the economy. The Fed is expanding the government loan modification plan to offer help to homeowners facing financial hardship and to those who have lost significant equity in their homes.

The HAMP guidelines will be used to determine who qualifies for this reduction of principal loan modification plan with minor adjustments to the original criteria. This is great news for those borrowers who have seen their equity disappear as home values continue to plummet, and leaving them with few options to sell or refinance. For those borrowers, a loan modification is the best option.

A principal reduction in the high loan balances for underwater borrowers is one way the Fed is trying to stabilize the housing market. Banks have been hesitant to offer much balance reduction to homeowners, so the government has had to get involved and offer incentives to get the lenders to really provide some kind of meaningful reduction in loan balances. Homeowners need to feel motivated to stay in their home and with many loans much higher than the home is currently worth, borrowers will often decide to abandon the home instead of making unaffordable payments.

The goal of the federal loan modification plan is to lower the principal balance for qualifying under water homeowners so that it represents 90% of the current market value. This will help re-establish some equity and give the homeowner the incentive to stay in their home and keep making payments, In turn, the foreclosure rates will decrease and home values can stabilize again.

If you owe more than your home is worth you should look into the federal loan modification plan and find out how you can qualify for this help. You could get a lower loan balance and a very affordable monthly mortgage payment. You will need to prepare an application for your bank that includes a financial statement. This will detail your monthly income and monthly expenses, and needs to prove that you meet the federal approval guidelines. If you are confused about how to prepare your financial statement, you can use a software program that will do all the calculations for you automatically-avoid mistakes and get it right the first time.

If you are underwater homeowner , feel free to contact me with any questions.


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