Making Home Affordable is a government effort to turn the struggling economy around with refinance and modification help. The loan modification arm of this plan is called Home Affordable Modification Program.
The Home Affordable Modification Program continues to help homeowners in need.
Unlike previous “bailouts” aimed at offering relief to large banking institutions, this one directly targets homeowners (or what the media has dubbed “Main Street”).
At the core of the economy’s struggles is the housing downturn. Millions of people have faced foreclosure and there are millions still to come. In order to stabilize the market, the Obama Administration introduced their Making Home Affordable Plan and backed it up with $75 billion in funding. All told, they expect to assist 3-4 million homeowners with modifications and another 3-4 million with a refinance program.
Incentivising the Banks to Modify
Loan modifications were being done before the government got involved, but the banks needed extra incentive to pick up production. With the government’s money, the banks are now more willing to approve a modification that they may have otherwise denied.
The program has been an evolutionary process as government officials and lenders continue to tweak it to maximize results. Already, some incredible results with this program have been seen, so it is working as reports show hundreds of thousands of people have already been helped.
What happens when you are approved on the Home Affordable Modification Program?
The plan is streamlined and follows a basic guideline. Every borrower that qualifies will have to make three consecutive on-time payments for the modified amount. This is traditionally called a “stip-to-mod.” If the homeowner meets this criteria, the modification becomes permanent. Ultimately, a homeowner can expect a modified mortgage payment somewhere between 31 and 38 percent of their monthly gross income. The lender is required to offer a payment no more than 38% for qualified clients. The government then kicks in additional money to lower the payment to as little as 31% of monthly gross income.
Additionally, there are cash incentives for both the homeowner and lender. Lenders are eligible to receive up to $4,000 over a three year period while clients can get up to $5,000 reduced from their principal balance over a five year period.
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