Emergency Mortgage Loan Modification Act of 2008
A loan modification agreement is made between a lender and borrower to reduce the payment burden of the borrower by reducing the interest rate on the loan, extending the length of the repayment of the existing loan, or providing the borrower with a different type of loan.
The modification changes the contract agreement which is designed to help homeowners who cannot make current monthly payments or whose payments are subject to go up due to impending adjustable rate increases.
The final decision on whether or not to accept the loan modification plan may not rest with the mortgage company. In most cases, the decision is made by the servicing firm which is under contract to the lender. Many lending institutions are agreeing to modification plans in order to ward off the defaults and foreclosure actions that are likely to come if something isn't done to put a stop them.
As a homeowner, if you are behind on your monthly payments or if you are struggling to pay them, you should contact your lender right away to see if you can qualify for a modification agreement.
Payments that are already delinquent can be tallied and amortized over a certain period of time in the form of a second trust deed or second mortgage, thereby giving the borrower a chance to begin making regular monthly payments on the first, usually at a lower amount.
•There is a big difference between a forbearance agreement and a loan modification agreement. The forbearance agreement offers a short term solution for borrowers who may have run into short term financial problems, whereas the loan modification agreement is meant to help those who may never be able to make existing payments in the manner in which the loan was underwritten.
The Emergency Loan Modification Act of 2008 was passed to provide workout plans for homeowners who took loans with high payments and adjustable interest rates and for those who bought homes at prices that dropped due to bad economic conditions and a slumping housing market.
This program was designed to help homeowners who are late on their payments, have high debt to income ratios, financial hardships, some bad credit issues, high loan to value ratios, and adjustable rate loans that have put making payments beyond the borrower's income.
If you are already behind on your mortgage payments or if you feel that you cannot make future monthly mortgage obligations because of financial reasons such as a layoff, increase in payments because of an adjustable interest rate, or if there is some other financial hardship, you may be eligible for a loan modification.
•To take advantage of the Emergency Loan Modification Act, call your lender and ask for the loss mitigation department. Do not spend your time talking to customer service because they cannot help you. To get the help you need, go straight to the source.
•You can also negotiate a loan modification with your lender without the help of others or you may use an independent company to help navigate you through the modification qualification process. Independent companies will charge you a fee for their help.
Not all borrowers can qualify, especially some of those who took loans using stated income, because with the loan modification agreement, you will have to show that you can make the monthly payments if you are approved. Nowadays, to qualify for any type of loan, loan modification, or other assistance, your loan application and package will be scrutinized with the utmost urgency.