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Are You Thinking Of A Loan Reduction Option?

Probably you've heard about the Obama mortgage reduction program. It is formally termed as the Principal Reduction Alternative (PRA).

So what Is A Mortgage Reduction Program?

It is when a lender agrees to reduce the principal balance you owe on your mortgage.

Why Would You Choose This Plan?

If your home has decreased in value to the point where it is worth less than you owe. The reduction on your principal can bring your payments down and inline with the present value of your home. Instead of missing payments and needing home foreclosure help, you can try to reduce your balance and reduce your payments to something reasonable.

HAMP or Home Affordable Modification Program

This is a loan modification program that President Obama created in an attempt to help the United States economy by assisting home owners with their mortgages. The concept being, if homeowners could be helped economically to avoid more foreclosures this certainly would have a trickle down effect on the overall economy. So, foreclosure help was a key point of this program.

Putting more money back in homeowners pockets would allow them to make their monthly mortgage payments. Plus with more disposable income available, they can spend more money thus giving the economy a crucial boost.

In addition to providing loan modifications HAMP also requires lenders to evaluate home owners on a case by case basis to see if they qualify for the PRA program.

Sounds Great Right?

Well, the problem is while lenders are required to automatically assess whether or not a homeowner is qualified for PRA, there is no incentive to do so. Presently, the U.S. Government subsidizes every approved loan modification. This denotes if a lender grants your loan modification, the lender will get $4,000 for doing so.

But with the mortgage reduction program there are no financial incentives. Consequently the number of PRA approvals are very low. That's not to say it's impossible to be approved. It just means it will require a lot of "fight" on your part. No one desires to face home foreclosure, so you need to do your research as much as you can to be prepared.

Benefits

The advantages are obvious. More money in your pocket and you may save your home from foreclosure.

What Are The Requirements?

You need to be"underwater" on your mortgage meaning you owe more than your home is worth

Fannie Mae or Freddie Mac cannot own or guarantee your mortgage.

Must prove financial hardship

Must actually live in the home you apply a loan modification for.

Must have received your mortgage on or before January 1, 2009.

You should be able to provide evidence that your income will allow you to make the modified payments.

Your mortgage payment is above 31 percent of your gross (pre-tax) monthly income.

You owe up to $729,750 on your 1st mortgage.

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If All Of This Seems A Little Complicated...

That's because it is. Applying for a loan modification is just like taking on a second job. The time and documents gathering is more than a notion. Conversely, you've got to do whatever is needed to save your home. If you're not familiar with how loan modifications work you'll need to pay time researching and familiarizing yourself with specific terms.

You will need a good understanding of the process when it comes time to negotiate with your lender.

Especially if you're hoping to take advantage of the mortgage reduction program. If you're not feeling fully confident. Consider the services of a reputable experienced loan modification company. They can save you valuable time and possibly your home.

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