Mortgage Modification Milestone

Today the US Treasury passed a benchmark in its efforts to help troubled homeowners. Half a million borrowers have had their mortgage payments modified under the Obama administration’s Making Home Affordable Program. Treasury secretary, Timothy F. Geithner pointed out that now mortgages are being modified faster than homes are being sold through foreclosures.

After a slow start in February, the program is finally picking up speed.Treasury had set a goal of helping 500,000 borrowers by the end of October and reached that point three weeks early. About 40% of the 1.2 million homeowners who qualify have seen their mortgages reduced. If you are still one of the majority who has not had his home loan bill cut, call your servicer immediately to get the process started. You do not have to be behind on your payments to qualify for a hardship reduction in your house payments.

Many distressed homeowners have complained that delays in the program’s implementation are caused by servicers dragging their heels.Borrowers have been discouraged by duplicate requests for document submissions or mortgage counselors who were ignorant of the government plan’s details. By the end of June, only 50,000, home loans had been modified. In July, the Treasury Department summoned mortgage lenders to Washington to take them to task.

Mortgage servicers have done a lot better since, training staff or hiring knowledgeable contractors to increase processing capacity. Lenders have also been spurred by the government’s financial incentive to participate. Under the Obama plan, servicers are paid $1,000 for each loan they modify, then $1,000 a year for up to three years if the payments are made in a timely manner.

A loan modification program starts with the most elemental analysis on the part of homeowners. Should they stay or go?

Why should a homeowner go?

  • Your neighborhood is changing for the worse.
  • Your children have moved away, or you need more space.
  • Home values are plummeting. You bought at the top of the market and see little likelihood of recouping your investment.
  • Work is  scarce in your area, or you have a job offer elsewhere.

Why stay?

  • You love your neighborhood and have a wealth of supportive social interaction where you live.
  • It’s your dream house.
  • Schools are first rate.
  • Work is available
  • You anticipate a rebound in home values

Once you’ve made your decision, your next step is to implement it in the way that lowers your credit score the least. If you decide to bail out before crashing, don’t trash your house in revenge leaving a mess in frustration before the bank tosses you onto the street through foreclosure. Approach your lender about a short sale , cash for keys, or  deed in lieu of foreclosure .

If you decide to stay, interest rates are now so low that you could well qualify for affordable refinancing, or even a short fi always your best options to preserve your credit score. Next try a loan modification. Don’t be intimidated by picking up the phone to ask for help. With a glut of foreclosed properties on the market, more and more lenders are open to helping you stay in your home.

Remember this basic principal of loan modification: With a foreclosure both the homeowner and lender lose. Through  a loan mod the homeowner wins, but so does the servicer. True, the lender is not earning as much as before, but it is still making a return on investment, which in these troubled times is far better than taking a loss.

Problems in implementing the Obama program still remain. Home loan servicers have been called back to the capitol for another round of meetings, yet more lenders have fallen in line.  If you haven’t yet done so, watch this video to see how eager most loan servicers are to help distressed homeowners like you.

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