Loan Modification FAQ

Some questions about the new loan modification by President Obama

This loan modification plan will offer a second chance for millions of homeowners trapped in unaffordable home loans.  This plan is prepared to help those facing foreclosure for qualified home owners.

Some lenders will be offered incentives to try and get home owners interested in the plan, however each application will be reviewed on a case by case basis.

Top 10 Questions on the Obama loan modification plan:

  • Do I have to be late on my mortgage to qualify? 

 No, the program is aimed at preventing foreclosures for all homeowners facing a financial hardship now or in the future.  Lenders and servicers actually get paid more to modify loans that are not yet delinquent.

  • How do I know if my home loan is eligible? 

If your loan amount is $729,750 or less and was originated before January 1, 2009 more than likely you will qualify for the loan modification plan.

  • I own a duplex, and live in one of the units-can I apply? 

Yes, as long as it is your primary and principle residence.  If you own a rental or an investment home you do not currently live in, it will not qualify.

  • If my current mortgage payment is not affordable, how will I know I can pay the loan modification payment? 

The plan seeks to lower the monthly mortgage obligation (including taxes, insurance and HOA dues) to equal 31% of your gross monthly income.  If your current payment equals more than 31% of your gross, you may qualify for a lower payment.

  • Will this loan modification plan apply to my second mortgage too? 

No, this program is only for first mortgage deeds, however your lender may be able to workout a plan to lower or eliminate your second mortgage as the Treasury Department is providing incentives to do so.

  • Are lenders required to offer this program ? 

No, it is a voluntary program.  Most lenders and servicers are expected to participate however because of the generous incentives offered by the Treasury Department.

  • How will my lender lower my payment to reach the 31% debt ratio guideline? 

 First, the interest rate will be reduced to as low as 2%, if the ratio is still too high, then the term will be extended to 40 years.  If still more is needed, then a portion of the principal balance may be deferred.

  • How can I find a bank or lender that is participating? 

The best way to just call a lender you trust or a referred one. You can also check with your local bank or check the governments websites for more information.

  • Will I have to fill out a lot of paperwork? 

You will need certain documents for your lender such as an account of your income and expenses,  provide your paycheck stubs, W2 and tax return.  The information you provide on your financial statements can have a big impact on whether you will be approved or not, so make sure you know how to complete that correctly. Talk to your lender for exact documents.

  • How much does it cost to use the loan modification program? 

The plan is free-there is no charge to apply or qualify.  The Treasury Department is warning homeowners against paying any large upfront fees to anyone.

This program could help you stay in your home during these rough economic times. For more information on any Tacoma real estate or any home or property in the Thurston and Pierce County real estate area, don't hesitate to contact one of our agents. We specialize in helping buyers and sellers come together with ease and dedicate ourselves to your real estate transaction.