“How Do I Modify My Mortgage?”

Although the severity of the economic crisis may have lessened in recent months, many people are still facing unemployment, reduced hours, reduced pay, and the possibility of foreclosure or bankruptcy. Negotiating a loan modification can allow a homeowner who is currently facing or emerging from an economic hardship to prevent foreclosure and lower his or her monthly payments.

The federal government has instituted the Home Affordability Modification Program (“HAMP”) to help homeowners seeking to modify their mortgages. The goal of HAMP is to reduce the homeowner’s mortgage payment to 31% of the homeowner’s gross monthly income.

Only certain types of mortgage loans are eligible for modification under HAMP:

* The home must be the owner’s primary residence;

* The loan must have been effective prior to January 1, 2009;

* The amount owed on the loan must be less than $729,750;

* The homeowner must have experienced some financial hardship (loss of income, increased mortgage payments, other increased expenses, etc.); and

* The mortgage payment must be more than 31% of the homeowner’s gross income

Loan modification programs are not limited to first mortgages. The federal government has instituted a similar program for second mortgages called the Second Lien Modification Program, which gives lenders incentives to reduce payments on second mortgages and home equity lines of credit.

Moreover, federal programs aren’t the only loan modification programs available. Many lenders offer alternative in-house modification programs of their own. Some even offer programs that actually reduce the principal amount due and owing.

A skilled attorney can help you as a homeowner to avoid common mistakes and persuade banks to comply with federal guidelines and laws. Rod Woodbury can be reached at 933-0777 or by e-mail at rod@woodbury-law.com.

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