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Mortgage Loan Modifications and Refinancings

[Dec 18, 2009.]


The government's mortgage loan modification program has helped fewer people than expected, but many of those who have been helped are getting lower payments. About 80% of home mortgage modifications in the second quarter resulted in lower payments, according to the Office of Comptroller of the Currency and the Office of Thrift Supervision.

Mortgage Modifications and Defaults

But apparently only 4% of homeowners who could be helped by mortgage loan workouts have actually received them, CNN reported. About 34% of borrowers who had monthly payments on mortgages reduced at least 20% had re-defaulted, compared with 63% of people who'd monthly payments stayed the same.

Mortgage Rates as Low as 2%

Some mortgage lenders have offered distressed homeowners super low mortgage reates to lower their monthly payments. I some cases homeowners have received mortgage rates of 2%. Some mortgage lenders have offered the low rates as an alternative to having to foreclose on home loans. In some cases, borrowers with severe financial problems have had mortgages entirely forgiven.

"We're hearing there's a lot more give from lenders. It often makes sense for the banks to take anything they can get," Rick Sharga, a spokesman for RealtyTrac, an online marketer of foreclosed properties, told CNN.

Mortgage Lenders Can Determine Eligibility

Homeowners who are behind on monthly payments on mortgagesand are interested in getting loan modifications should start by visiting the Making Home Affordable Web site to get more information. Borrowers can fill out a questionnaire to determine their eligibility for a loan modification. Homeowners also can contact their mortgage lender or loan servicer to find out if they qualify for the assistance.

People who aren't eligible to have their mortgages modified could end up qualifying for refinancing through the government's program. Borrowers must be current on mortgage payments to receive assistance through this program. They also can't owe more than 125% of the current market value of their property. Doing a refinance may or may not lower a home owner's monthly payments, but should improve the long-term affordability of their home mortgage.

Snags in the Proccess

Mortgage loan modifications and refinances haven't always happened as quickly as homeowners would like. In many cases deals have been held up or cancelled because borrowers didn't submit required paperwork. Other problems have resulted from banks not asking for proper documentation or simply not getting back to homeowners requesting help.

Borrowers should be persistent about talking with someone at their mortgage lender who can discuss their options for a modification or refinance. They can also work with a housing counselor who can help them through the process.


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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