If you are interested in understanding and getting assistance with the Obama Mortgage Plan, then this section is for you.

It’s possible that you could be one of the 5 million homeowners to benefit from President Obama’s home loan modification plan.

Our President realizes that the financial crisis in our nation has taken a hard hit on many people who own homes. It’s no longer uncommon to see a foreclosed house or two in every neighborhood. Home values have quickly depreciated, and every time a new home is foreclosed the rest of the houses in the neighborhood lose up to 9% of their value. The decrease in house prices has been so dramatic that lots of people owe more money on their house than it is currently worth. Due to these serious issues, Obama’s home loan modification plan has been implemented to help out.

In February 2009, the new plan was announced. Starting March 4, 2009 it would begin to help homeowners in trouble. One part of the plan is supposed to assist people facing foreclosure by giving them a special opportunity to refinance. Traditionally, people have been required to have 20% of their home paid for before refinancing. Because of rapidly falling house prices, many homeowners used to meet that criteria but no longer do. People in these situations now have special approval to refinance and stay in their homes instead of having them foreclosed.

The second part of the plan is the home loan modification plan. Estimates say that 4 to 5 million people could benefit from modified home loans. The plan offers a Standard Waterfall for lenders to follow when modifying home loans, streamlining and simplifying the process of getting people more affordable monthly payments. Lenders receive money for identifying at-risk homeowners and lowering their monthly payments so that they avoid foreclosure.

Homeowners at risk for foreclosure may have their mortgages adjusted as per their income by their lender. First, the lender lowers interest rates to arrive at a monthly payment that is 38% of the borrower’s gross monthly income. Lenders get monetary incentives to continue decreasing the interest rate through a per-dollar matching program with the U.S. Treasury.

The Treasury will continue matching until the loan payment has reached a goal ratio of 31% of the borrower’s gross monthly income. Due to a layoff or wage reduction, many people find themselves suddenly paying 40% or even 50% of their monthly income to their mortgage, and that simply isn’t possible to keep up for long. If that sounds like you, then a loan modification is an absolute necessity if you want to hold on to your house.

The Standard Waterfall is an easy-to-follow, step-by-step plan for lenders when deciding how to modify loan terms. Having a crystal clear set of rules about how to modify leans will smooth out the process and prevent more foreclosures. Lenders used to "modify" a delinquent loan by adding missed payments to the principal of the loan, but didn’t do much to address the issue of a monthly payment that was just too high. Obama’s home loan modification plan understands that real people need answers about monthly payments, and tries to answer the concerns of people with an unaffordable monthly payment.

By Timothy Croy

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