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Mortgage Companies Asked to Do More to Modify Loans

[Jul 10, 2009.]


Mortgage companies are being asked to do more to get home loans modified under the government's housing rescue plan. The Obama administration sent a letter to chief executives of the mortgage companies that have contracted to modify mortgage loans through the program. The move comes amid growing complaints that the mortgage rescue plan has been slow to get going, leaving many homeowners vulnerable to foreclosure.

Mortgage Loans Modified

So far about 270,000 borrowers have had mortgage loans modified under the Making Home Affordable program. When the rescue plan was announced, the Obama administration said it was aimed about helping about 4 million homeowners who are struggling to pay their mortgages.

Mortgage Companies Not Moving Fast Enough

Among the complaints about the program are that mortgage loan servicers can't cope with the number of borrowers seeking help. The letter to the mortgage companies called for them to add staff and improve training to handle loan modifications. 

Homeowners who have already contacted their mortgage lenders but haven't been approved for loan modifications shouldn't give up. Mortgage loan servicers are also being asked to put steps in place to assist borrowers who have been frustrated in their attempts to have loans modified. Borrowers should contact their loan servicers again and push to get their cases moving.

Mortgage Modification Eligibility

A homeowner who can't pay his or her mortgage and is already behind on payments should contact their mortgage lender to determine eligibility for a loan modification. Here are some things to keep in mind:

  • The borrower must own and live in a one- to four-family home.

  • The unpaid principal balance on the mortgage loan for a single-family property must be $729,750 or less.

  • A borrower's current mortgage payment must be more than 31% of his pre-tax monthly income. That amount includes taxes, insurance, and home owners association dues.

  • Borrowers must show they are struggling with mortgage payments because of a significant change in their financial situation, such as a job loss.

Borrowers don't have to be behind on monthly payments on their mortgages to be eligible for help. But they must be able to show that their financial situation is such that they are at risk of defaulting soon. For example, a homeowner who has an adjustable rate mortgage (ARM) reset could find herself struggling to make the higher monthly payments. 

In the meantime, borrowers who are waiting for approval to have mortgage loans modified should avoid companies that make outrageous claims about offering help or ask for fees upfront.


About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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