Recently, the Obama administration turned the Making Home Affordable (MHA) Plan into a law. Now lenders have a standard method of modifying home loans for homeowners who are having difficulty paying their mortgage. Homeowners can modify their mortgage terms through the MHA’s Homeowner Stability Initiative until the end of 2012.
The $75 billion is earmarked for lenders and borrowers so they will negotiate agreeable and acceptable loan modifications. The lender is motivated by the fact that a loan modification is more profitable for them than a foreclosure. With the addition of a monetary incentive, loan modifications are a much better alternative for a lender. By doing this the MHA hopes to help 4-5 million homeowners modify their loans.
Even though this plan has been in operation for some time, many people still believe things that are not true. Many people think that the government is forcing lenders to follow their plan even if they do not want to participate. This is not true. The government does reward lenders who do participate by giving them incentive payments if they do follow the procedure and modify loans, but they do not have to.
Lenders only have to participate if they wish and if they do decide that it is in their best interest to foreclose they are encouraged to proceed. The thing is, this usually doesn’t happen. Foreclosure is usually not a good financial option and lenders would rather avoid it. Given the financial incentives offered by the MHA plan, lenders are almost as anxious to approve a modification, as the homeowner is to have it approved.
Another misunderstanding is that MHA modifications will help house flippers and speculators. In order to qualify for the Homeowner Stability Initiative, the homeowner must live in the home for which the mortgage is being modified. The point of this plan is to help homeowners keep their homes, not to help investors. An address check will be done to make sure this the primary resident of the home holds the mortgage.
In this time of financial instability, people are naturally weary of a new program that they do not understand. People are still learning about the MHA plan and its processes. Over time, as the plan becomes more common, these misconceptions will be put to rest.
Don’t believe misunderstanding about the Making Home Affordable plan and home loan modifications. Learn the facts about modifying your loan and what you need to do to lower your monthly mortgage payments.
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